Michel Bastos
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China Makes A Bet On Cryptocurrencies As The Next Fintech Revolution: Yuan Coin

Among all the newest buzzwords in financial technology (fintech) and banking, ‘digital currency is one of the most rapidly evolving revolutions in this field. Digital currency, often known as digital money or electronic currency, refers to money-like assets and electronic-only currencies such as cryptocurrency, virtual currency, and central bank digital currency (CBDC).

As the COVID-19 outbreak continues to impact global trade and financial exchanges, several governments throughout the world have been gradually researching the integration of this new money form, driven by a sense of urgency to become digital. Unlike Bitcoin, which is a decentralized cryptocurrency, a CBDC enables a country’s monetary authority to regulate and back it up with reserves, boosting financial security for customers while ensuring the central bank’s control over the money supply. Despite the fact that no country has officially established a CBDC, central banks in over 60 countries, including Canada, Japan, Russia, and the United Kingdom, have conducted feasibility studies or pilot programs to investigate the viability of incorporating digital currency into their national banking systems. China has already surpassed all other major economies in its objective of issuing a CBDC.

China Sets High Renminbi Digital Goals

China began researching the digital yuan coin (also known as the e-CNY or digital renminbi) in 2014 when the People’s Bank of China (PBOC) – the country’s central bank – began investigating the potential of a Chinese digital currency. It formally began the Digital Currency Electronic Payment (DC/EP) research project in 2017, with support from the ‘Big Four’ state-owned commercial banks and three major telecom carriers, moving the digital yuan from concept to reality. From its first testing in April 2020, the digital yuan has been available for selected participants in ten cities throughout China to make retail payments under the DC/EP pilot program. By July 2021, the ‘white list’ of people eligible to participate in the trials will have increased to 10 million. Those on the white list can sign up for a lottery when their city government launches its pilot program, and lottery winners receive a one-time C$40 red packet that can be used for small-ticket purchases at a variety of participating merchants, including shopping malls, food, and beverage outlets, online shopping platforms, and public transportation systems, via the digital yuan official app. Beijing’s trial initiative was started in June 2021, with the municipal government giving 200,000 red packets for a total of C$7.8 million.

Domestic Drivers Of The Digital Yuan Expansion

One of the reasons Beijing is pushing for the digital yuan coin  is that it would allow state-owned banks to better access customer data and insights, which are now stored by privately-owned payment systems in a collection process that mostly bypasses the official banking sector. Beijing’s recent efforts to rein in antitrust and monopolistic market practices that it feels have developed among its data-rich and ever-expanding internet giants are related to the Chinese central bank’s desire to reclaim control of payment data and consumer information.

To Sum It All Up 

The People’s Bank of China looks to be taking its time expanding the scope of its trial program. It is attempting to strike a balance between privacy and the hazards associated with anonymity, such as money laundering and tax evasion, while also monitoring them. The PBOC has said repeatedly that it wants to establish a solid digital currency infrastructure and regulatory environment before proceeding with a full rollout. Due to the fact that the digital yuan is being issued by the central bank, it is likely to be distinct from more well-known cryptocurrencies such as Bitcoin when it launches.

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