China’s e-Currency, the digital Yuan, was launched on the 4th of January 2022. The digital Yuan, also known as e-CNY or e-RMB, is state-supported to monitor the movement of currencies, an individual’s financial movement, and where and what they purchase.
The digital wallet application (e-CNY) is available to both iOS and Android users, with a fast growth of over 261 million individual users who have installed it. Around 87.5 billion Yuan transactions have been made using the digital currency.
The Chinese government basically converted their physical money to a digital currency and made it part of their economic system. China’s central bank has been making arrangements to utilize the digital currency before the Beijing Winter Olympic Games in February 2022. It has been made available for WeChat users ahead of the game. This enables foreigners present in China to make daily transactions through the e-CNY wallet without opening a domestic bank account.
How Does It Work?
The currency is more like the digital version of the physical Yuan.
The digital Yuan is distributed to domestic banks in China through the Central Bank (The People’s Bank of China – PBOC), in which a reverse amount which equals the amount of digital Yuan shared to customers will be deposited back to the central bank by the domestic bank. The consumers are then expected to use the digital wallet to store their currency and also make transactions with the digital currency using the QR code.
According To e-CNY Group Research, The Digital Yuan Aims To;
- Ensure the efficiency, fairness, and safety of competitions and retail payments.
- Explore internationally and also improve methods for cross-border payments.
- Satisfy the public and their demand for a digital currency.
- Enable the central bank to expand the forms of cash made available to the public.
How Is The Digital Yuan Different From Other Existing Cryptocurrencies?
- In terms of structure, other existing cryptocurrencies do not have a definite and centralized structure. The digital Yuan has a state-formed structure and has the Chinese government controlling and monitoring its every activity.
- The fact that the Chinese government will monitor the activities of the digital Yuan does not give room for anonymity. Unlike other existing cryptocurrencies, which can operate anonymously.
- The operation of the currency with legal status is a major difference between digital Yuan and other cryptocurrencies. The digital Yuan can be used as a legal tender which cannot be done with other e-currencies.
Benefits Of The Digital Yuan
- It favours the unbanked population; members of the population who do not have access to banks to make transactions will have an opportunity to join the leading economy.
- Improve Global Economic Status; the Chinese currency, the digital Yuan will have more status in the global economy since China has the second-largest economy globally.
- Efficient data collection and crime detection; economic data and statistics can be collated through digital methods.
Digital monitoring and tracking of transactions make it easier to prevent and detect fraud, money laundering, and terrorist financing.
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