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The project of a national digital currency has been in the works in China since 2014, with the People’s Bank of China leading the project.
China has been slowly transitioning in the last few years into digital currency to eliminate cash transactions in bills or coins. The country has been running trial tests into this realm for some time now.
In 2020, some trials were introduced in certain services, such as food delivery and rideshare apps, in the city of Shenzhen and a few others and were deemed successful.
China has also distributed millions of dollars worth of the digital Yuan as part of the currency's real-world trials, including some amounts handed out by local governments in some cities through a lottery.
According to a plan released in August by the Ministry of Commerce, several areas of the country have been targeted to serve as a testing ground of the digital Yuan, including the Guangdong-Hong Kong-Macao Greater Bay Area, over the next few years.
Regarding payment systems, the nation's digital landscape is led by Alipay and WeChat Pay systems. In contrast to those privately-owned payment systems, the digital Yuan is likely to increase efficiency, being an actual currency run by a Central bank.
China’s CB has now introduced the #digitalyuan. The digital yuan will eventually replace cash in circulation interfacing with the modern day banking system. World’s central banks have begun exploring a national digital currency bolstering competitiveness in the digital economy. pic.twitter.com/1FWqEA1aBf
It is still unclear what technological platform the Chinese digital currency is running, with users usually having to download a separate app to receive digital Yuan.
As opposed to the world's most popular de-centralized blockchain-based cryptocurrency, Bitcoin, a legal application that offers users anonymity, the digital Yuan will be controlled by the People's Bank of China. However, the central bank announced that its variation of cryptocurrency would allow anonymous transactions in small amounts.
In an article in Yicai Global, the deputy governor of the People's Bank of China Fan Yifei said that keeping a degree of anonymity "within a controllable range" could help with financial security. The payments would be anonymous to some degree, but data analysis tools could help the central bank crackdown on money laundering and other criminal offenses. Also, the country's telecoms operators will not be able to disclose the phone numbers and personal data of users to any third parties, and the information would also be encrypted before being passed.
Beijing and Shanghai Officially Joins The Digital Yuan Project: As per Global Times, the two largest cities in China – Beijing and Shanghai – will be joining the digital Yuan project. The capital city's mayor said that they would be hastening the… https://t.co/aov7G2ySJ8pic.twitter.com/0ddxISC7Ra
Despite the currency being centralized in the People's Bank of China, Fan offered a "two-tier system," with the PBOC distributing the digital Yuan across commercial banks, which will pass the currency into consumers' hands.
China has been strengthening Yuan's positions in the global arena. To a point, experts predict that it could become the third-largest reserve currency in the world after the U.S. dollar and the euro within ten years.
The PBOC has already started to lay the groundwork for its digital currency going global.
Last month, the PBOC joined central banks from China's special administrative region of Hong Kong, Thailand, and the United Arab Emirates to explore a digital currency cross-border payment project. PBOC has already tested the digital currency in Hong Kong by allowing the residents to make payments in Guangdong Province.
#FromTheSouth News Bit | China condemns the United Nations, Canada, the United Kingdom and the European Union after the latest announcement of sanctions against Chinese individuals and entities. pic.twitter.com/W9J6YJdTee