During the last seven years, the People’s Republic of China has been working on the creation of a blockchain-backed digital currency project. Now it is completed; the currency received the name Digital Yuan.
Defining Digital Yuan
This currency is supported by the state and is designed for tracking all movements of the currency. The currency was created in a specific way so that the state could watch closely all personal finance movements and purchase details. We still yet have to explore how Digital Yuan differentiates from other cryptocurrencies.
The Digital Yuan project
The project of the Digital Yuan has two phases: distribution and expenditure. At first, the People’s Bank of China (PBOC) will distribute the Digital Yuans to commercial banks whose task will be to pass the currency to consumers. In addition, a special service is to be made available for customers to exchange coins for Digital Yuan. Overall, millions of dollars in the form of digital currency were provided by the Chinese government to many cities. The process of the Digital Yuan distribution was performed via an app.
Differentiaing Digital Yuan and other cryptos
There is one main distinguishing feature when comparing Digital Yuan and other cryptocurrencies – its legal status. As it was stated, customers can use Digital Yuan as a payment method or position it as a legal tender.
Moreover, while usual cryptocurrencies do not have a centralized structure, Digital Yuan has one and it is state-formed. The Digital Yuan is controlled strictly and exclusively by the local government.
And lastly, standard cryptocurrencies are based on the principle of anonymity. Meanwhile, with Digital Yuan, the Chinese government will have access to monitoring all crypto activities in the country.
Benefits of Digital Yuan for China
- Digital transformation
Companies and applications as WeChat are the best examples of digital transformation. Digital Yuan though does not need to transform as it initially enters the market in this status. This feature is helpful for the government to track the financial system which is easier than monitoring cash.
- The participation of the unbanked population
Some members of the population do not have access to any banks. By using Digital Yuan they will obtain access to participating in the leading economy.
- The higher status in the global economy
In addition to other benefits, the Digital Yuan will help the Chinese currency to have a better position globally. It will put the Renminbi into international reserve status. Although the US dollar now has an 88% share in the international economic network and the Renminbi only 4%, the situation may change as the new digital currency becomes popular among international traders.
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