There are several reasons behind China’s launching of the digital Yuan. First, it is issued by the people’s bank of China (PBOC). The main reason behind the creation of digital one is to replace dollar dominance in the international market, where the dollar is a universal exchange currency. According to a study by newest cryptocurrency, it is seen that China has banned the use of cryptocurrency in its domestic markets, and the reason behind banning cryptocurrency is that to attract people towards the use of digital Yuan. Digitally Yuan can be used for domestic exchanges, international markets, cross-border payments, and anonymous movement of money from one source to another up to a fixed limit. All the activities performed digitally by Yuan are under the control of the centralized system of China, and the Chinese government can easily detect the flow of money.
Digital Yuan will offer several benefits to the Chinese government and its population. China is the first to launch its digital currency and start real-world trials in some major cities.
Digitally Yuan is a liability of the people’s Bank of China, and the use of digital Yuan will protect the personal data of its users and provide safety from illegal activities like fraud, Cyberattacks, money laundering, and anonymous movement of money.
Digital wallets which hold digital Yuan will not be linked to any bank account. They will directly work on a mobile number to transfer the payments from one source to another. People’s Bank of China will not pay any interest on the deposits of digital Yuan. The interest is payable only on M1 and M2 deposits. No interest is paid on MO deposits. Only banks can convert digital Yuan into cash and vice versa.
Benefits of a digital one
Digital one will help China to grow over the world. The countries will start using digital Yuan for trading and other loan payments. As the use of the digital Yuan increases, it will help China gain more strength and become a powerful nation that can replace the dollar’s dominance in international markets.
Digital Yuan will grow in Chinese markets if the digital Yuan concept reaches the assumed hype.
As we all know, the digital Yuan is under the control of the government, and all the money which flows through the digital Yuan is controlled or can easily be traced by the Chinese government. However, the centralized financial authority in a payment system creates trust among citizens of China and can prevent users’ wallets from cyber attacks.
It has become easy for the Chinese government to surveil the flow of money into the markets, and it can also be recorded the use of money by different companies in different areas. Therefore, the government can also guide people on the proper way to invest their money and to get the best out of the small investments made with digital Yuan.
The Digital Yuan concept is way more secure than any other decentralized platform, as the presence of government and the flow of information and money through centralized channels make the digital Yuan a safe option for citizens. Digital Yuan is nothing different from physical cash. It is just another form but in digital cash.
It will also help to reduce illegal activities like fraud, money laundering, and tax evasion as the government has all the control related to digital Yuan and can control the flow of money towards a particular thing.
Being a centralized currency digital Yuan creates trust among citizens of China to accept digital Yuan for making online digital payments. In addition, comparing cryptocurrencies with the digital Yuan creates a stable investment value. In contrast, cryptocurrencies have highly volatile prices, and due to the absence of any central government authority, cryptocurrency makes a chance of money loss, value, and time.
The central control of the digital Yuan will remain in the hands of the government, or the Peoples Bank of China will hold all the procedures related to the digital Yuan.
When it comes to trust, most of the citizens of a country trust the government authorities or anything launched by the government. Therefore, the presence of the government in monetary affairs is an attractive feature of the digital Yuan. This will create trust among the people of China and help the digital Yuan achieve heights in less time.
To create hype and challenge the most stable currency of international markets and to compete with the volatility of cryptocurrency digital Yuan will take a long time to gain heights. Digital Yuan is a different concept other than cryptocurrency and fiat money. It is good to get all the related information digitally before adopting.