The Digital Yuan Aims To Become The New Standard For The Payments Industry
The concept of Central Bank Digital Currency (CBDC) is not new. You can check the more info here to learn digital Yuan trading from scratch. It has been around for several years and has been subject to various debates among the world’s finest economists.
Dowd argued that Central Banks should consider introducing electronic money as a new payment form alongside deposits and banknotes. In his paper, he also addressed privacy concerns and how this currency could change consumers’ perceptions of money if it became widespread.
The below-mentioned portion explains how this will reflect a push toward moving away from physical cash due to the increased use of digital transactions in China. Meanwhile, international perceptions of CBDCs will also dictate how other countries view this method. It looks like there’s no stopping China’s initiative: it is just a matter of time before they take the lead in the payment industry. Recently, the People’s Bank of China (PBOC) and the Chinese government held a conference to celebrate an important milestone: cash in circulation has dropped below 7 per cent.
The Economist reveals that the digital yuan was developed by a couple of research institutes, including the Beijing-based iResearch Centre for Information Technology Research. It’s one of China’s most prestigious research institutions. The idea behind it is to create a digital currency that can be ‘compared with other major currencies, according to the CEO of the research centre, Wang Xiaochuan.
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Concept of Central Bank Digital Currency:
As The Economist points out, the concept started getting a lot of traction back in 2012. Some economists hoped that CBDC could become a ‘timely remedy’ to prevent future crises, as was noted in a paper published back then.
Since then, numerous central banks have been looking into digital currencies and have even created prototypes. These include Japan, Sweden and the U.K., while others, such as China, had plans to test their digital currency soon. In 2021, the digital yuan became the first ever central bank digital currency to operate with complete legitimacy in a country like china. Moreover, unlike cryptocurrencies, the digital yuan does incur complete anonymity and security as the government authorities have massive control over the supply and interoperability of this currency.
What if the digital yuan becomes a standard for the payment industry?
The Economist article claims that, if successful, China could set a new standard for electronic currencies that might even replace the dollar in the future. The research findings from the PBOC show that digital currency is becoming more popular in China, and cross-border e-commerce transactions and mobile payments are driving this trend. According to economists and researchers behind the project, the digital yuan will be logged into the PBOC’s existing settlement systems, but it will also come with ‘holistic’ upgrades.
As The Economist puts it:
Chinese consumers have long been comfortable buying things online and in physical stores using their mobile phones. As a result, they are less likely to trust a government agency to handle their money than a big bank – even though the PBOC already has vast powers over the money supply. China’s central bank has also tried to reassure people with suggestions that it will guard people’s privacy in this digital world, including personal information about its users.
Interesting, isn’t it? While many countries were cautious about introducing a CBDC, China seems more determined and serious about this idea. The Economist claims that the adoption of CBDC will depend on how successful other countries will be at pushing this concept forward. It will be interesting to see if other countries will follow China’s lead and how the global CBDC market will evolve in the future.
What pros can digital yuan offer users if it becomes a standard for the payment industry?
As mentioned earlier, China will hold substantial control over the digital yuan to regulate how much money is supplied to the market. It means that the inflation rate will be lower, and this currency is less volatile when compared to other cryptocurrencies.
On top of that, as digital currency becomes more popular in China, people tend to use it for various transactions. It would also lead to lesser cash being used for payments which means a lower risk for corruption and crime. If a country like China is willing to back this idea up with action, other countries might soon follow suit and implement their systems. The benefits digital yuan can offer are extraordinary, for example, costless transactions, faster transactions and enhanced security.
