China has reportedly launched a blockchain version of its own currency. The real-world trials for the digital currency are being conducted in several cities including Chengdu, Shenzhen and Suzhou.
Initially reported by Wall Street, the digital currency (digital Yuan) will be controlled by the Chinese central bank. “It might seem money is already virtual, as credit cards and payment apps such as Apple Pay in the U.S. and WeChat in China eliminate the need for bills or coins. But those are just ways to move money electronically. China is turning legal tender itself into computer code.“ The Wall Street Journal (WSJ) reported.
It was also reported that based on a lottery system, 750,000 recipients have already been determined and can start spending digital Yuan for online shopping through a special app or at stores according to The Wall Street Journal.
The Chinese digital currency has been created with the aim to replace paper money and coins, but not the money deposited in bank accounts for long-term. Moreover, the goal of the Chinese government is to also make international and national payments cheaper and quicker for both; consumer and large-scale transactions.
The work on digital Yuan program started back in 2014, right after bitcoin’s popularity started to rise in the nation.
What will be the impact of digital Yuan on China?
Nationwide use of the digital currency will provide greater visibility to the Chinese policy makers regarding circular money flow in the Chinese economy. It will also help them experiment by targeting monetary policy interventions on particular economic classes, regions or other groups.
Other than this, it will help China improve its mainstream economy by encouraging its unbanked population to opt for digital banking. China is one of the biggest nations with the largest unbanked population. Digital currency will help fill this gap by allowing the general population to participate in the mainstream economy.
Moreover, since the Chinese government will have total control over the transaction system, it will also provide them transparency regarding the amounts of money being transferred, and where it is being transferred, which can help them investigate and detect any apparent fraudulent patterns.
Is China the only nation with digital currency?
Other than China there are several nations that have been working on launching their own digital currency. In the U.S., M.I.T and The Federal Reserve are researching to successfully develop their own form of a digital dollar.
Sweden’s Riksbank is conducting real-world trials of e-krona, a new form of digital currency. Whereas France has also started experimenting with digital currency and plans to launch it soon.
However, China is the winner in the global race to launch CBDC first. With the digital currency already being used in several parts of the country, the nation has certainly received a head start in the competition.