Currently, 10 million yuan in digital currency worth $1.5 million has been issued to about 50,000 randomly selected residents out of a total of 1.9 million people who applied.
China recently announced to be taking an important step in launching its digital currency with trials taking shape in Shenzhen. According to the recent buildup, China’s digital currency will be used with popular payment networks like Alipay and WeChat. This follows the recent announcement about the draft law meant to provide legitimacy and regulatory framework for the use of the Digital Yuan.
Mu Changchun, the head of the People’s Bank of China Digital Currency Research has revealed that the digital yuan would be made compatible with major payment systems including Alipay and WeChat.
In a conference, Mu clarified the controversies surrounding the initiation of China’s digital currency with people claiming it will compete with Alipay and WeChat.
In response to a popular local post that suggested that the digital currency will curb the dominance of Alipay and WeChat, Mu said the digital yuan is in a different dimension from Alipay and WeChat. Alipay and WeChat will serve as the wallet while China’s digital currency will serve as a currency hosted by these wallets. This will in no way affect the dominance of the said payment networks but instead, work hand in hand with them.
Another important clarification made by Mu has to do with the speculations that the digital yuan will operate like Bitcoin and Facebook‘s Libra. The digital currency will operate on a centralized infrastructure to offset most of the demerits of pure cryptocurrency that affect its adoption as a legal tender. It will be a statutory and digital version of China’s physical cash.
Also, the introduction of China’s digital currency will open the way for the common challenge of counterfeiting as counterfeit wallets would be difficult to avoid entirely. However, the impact could be reduced if all parties involved ranging from the Central bank to the common user take the necessary precaution in its usage.
Currently, 10 million yuan in digital currency worth $1.5 million has been issued to about 50,000 randomly selected residents out of a total of 1.9 million people who applied. The government plans on issuing subsidies in digital yuan to the local offices to curtail some popular issues like corruption.
Summary of China’s Digital Currency Story
The digital yuan was started in 2014 and has been probably the most advanced Central Bank Digital Currency initiative across the world. It starts with users downloading a digital payment like Alipay and WeChat to keep the funds.
This will work by generating QR Codes to be scanned by payment terminals. It will replace physical cash such as coins and banknotes and will be distributed by the PBOC. This will provide a good view for policymakers to understand how money flows around the economy. Its importance is numerous including tracking financial flow such as terrorist financing and money laundering.
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