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- The China Central Bank has begun the trial of the digital Yuan for them to do transactions digitally
- Officially it is called the Digital Currency Electronic Payment System (DCEP)
- Now Chinese can sell, purchase anything from the mobile wallet and there is no need for cash in hand
With every new technology comes challenges but that does not mean to not try the newer ways. The best example for this is China where the Digital Yuan has been rolled out on a trial base to see the response of the citizens.
Life at ease with digital money
The digital Yuan is faster than the credit and debit cards on digital wallets like apple pay. There are other incentives too like zero transactions from merchants and it is 100 percent trackable by China Central Bank. Once it is launched nationwide it will not only be a boon for citizens but also foreign companies sitting in the region.
Feature of Digital Yuan
The currency will operate in a two-tier system. Firstly, the People’s Bank of China (PBOC) will distribute the digital currency to all the domestic commercial banks and then they will pass it on to the customers. Secondly, users will have a digital wallet on their phones or electronic devices and will be able to do the transaction of goods and services bypassing the electronic currency to one another. PBOC will keep a check on each transaction done by the user.
China will be the first major economy to introduce digital currency in the real world. The Central Bank is also planning to replace all the currency with digital Yuan if it is successful. Users also believe that it is easy to use Digital Yuan. There are other key things to be kept in mind as to whom it should be available, the degree of anonymity, whether there will be a peer-to-peer transferability, or whether all transactions will go through the Central bank. All of these features are yet to be planned and executed once the currency goes in full swing.
The Central Bank is also planning to help users make transactions even without an internet connection.
Challenges of Digital Yuan
The Digital Yuan will have the potential to replace cash entirely. In the long run, the scope of benefits will widen from digitalization. However, with every new technology, comes challenges as well. Digital Yuan is directly under the Central Bank’s authority. No third party involved in keeping a check on the data of the users.
Precautions
There is a concern that digital Yuan may violate or infringe user privacy. There is a need to control anonymity as well. The Central bank has promised to protect the user’s privacy. For now, people can choose what type of currency they want to use currently. But once society becomes cashless, it expects the digital Yuan to become the primary way to do the transactions.
The Central Bank has the authority to control the money supply but their actions to restrict digital currency will have a more immediate effect, leaving companies holding that currency all the more vulnerable. The currency can be valid or invalid based on its own priorities.
Well, there are privacy concerns too as it creates more efficient monetary policies and also counters criminal activities. China’s Central Bank has said that the Digital Yuan system will help combat Money laundering and terrorism financing.
The Central bank is also finding ways to make international transactions possible in Digital Yuan. But there is a big variable here to see if that is going to work. Mu Changchun, Director of the Digital currency Research institute of the PBOC also put forth his opinion on the anonymity issue and said that it is a key feature of the virtual renminbi.
He also emphasized that the government is working on features that will prevent illicit activities like money laundering and terrorism financing. Other illegal financing activities, tax fraud, or evasion will also be addressed by the new financial platforms.
Nevertheless, the date for the official launch of the digital Yuan has not been finalized yet but the experts believe that the Digital currency will be launched in February 2022 nationwide.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
