Digital Yuan Is the First Ever Central Bank Digital Currency
The issuance of a digital currency will help China eliminate cash circulation and cut down on counterfeiting. You can check Yuan Pay Group to begin bitcoin trading with the right tools, trading strategies, and guidance from experienced traders. It will also improve cross-border payment efficiency, enhance information transparency and sharing and improve financial inclusion, in line with the government’s objectives.
On June 20, 2016, China’s central bank announced it would launch e-CNY—the first Central Bank Digital Currency (CBDC). This mass issuance is expected to increase liquidity while keeping prices stable.
The use of CBDC in China:
The CBDC will also be used to pay for government social security fees and pensions. Coins and banknotes in China exceeded 36 trillion yuan or 50% of the M2 money supply in 2015. The circulation of this enormous amount has brought many economic and social problems. First, it consumes a considerable amount of material and environmental resources for minting coins, producing paper notes, and transporting them to markets around the country. Minimizing the circulation of cash will help to protect the environment. Second, it encourages corruption as large stacks of cash can be passed along quickly for bribes. Third, it has made people dependent on notes and coins for daily use instead of electronic payments.
Finally, digital money can track every transaction within its network through a public ledger system called blockchain technology (which is adopted by bitcoin). Therefore, as a national initiative, e-CNY is an essential element that people should bring into being on time to meet the country’s e-payment needs. At the same time, it should also help to promote international cooperation and conduct financial support for developing countries and small island states.
The future of the digital Yuan in China:
It is estimated that the global digital money market will reach US$1.6 trillion by 2023, with digital money playing a much more significant role in daily life as a medium of exchange and an investment vehicle. Central banks and governments which have not entirely issued cashless payments are also waiting to see how digital currencies such as e-CNY will perform, including Japan and Sweden.
After all, issuing an e-CNY is just one step toward a cashless society. It comes with many challenges, such as cybersecurity risks when using financial technology (Fintech) applications to transfer money electronically. The critical questions for China’s central bank are how to ensure the security of e-CNY, increase users’ confidence in e-CNY and give them strong reasons to choose it over traditional currency.
China is at a stage where the use of CBDC is inevitable. We will see more countries worldwide issuing digital currencies at their own pace, given that new international standards and frameworks have been put in place.
In the end, CBDC is a powerful tool enabling countries to build their digital financial infrastructure. China’s move will promote innovation in the development of digital money around the world and is expected to push more countries toward the development of CBDC.
The blockchain industry has caught the attention of regulators and government officials as it can potentially disrupt many industries in China, such as financial services, supply chain management, information security, etc.
Will India release the digital rupee like the digital Yuan?
With the understanding of the relationship between digital currency and gold and gold coins, it is reasonable to expect that India will also issue digital rupees like Digital Yuan.
When asked about the likelihood of India introducing a digital currency, authorities said India would not introduce it as long as it does not have a computerized system for exchanging cash and managing assets to cover taxes and traces.
The Indian government has been working towards introducing a cashless society with the help of digital currency. The RBI has stipulated that banks must support the move toward a cashless economy and ensure that their infrastructure is designed to handle digital currency transactions.
Currently, 86% of all bank accounts in India are under the Pradhan Mantri Jan Dhan Yojana scheme. However, the Indian government aims to increase this number so that every individual in India will have a bank account and be able to use them to carry out transactions electronically through any channel, including mobile phones.
Does every country need a central bank digital currency?
The popular view is that central banks are the issuers of currency. So, it is natural to think that if these countries issue digital currency, they will issue it via the central bank. However, this is not necessarily true. For example, we have seen that in China, the Center of Science and Industry in Shanghai is responsible for issuing digital currency by integrating it with the city’s “China Public Blockchain Technology” platform. This model may be appropriate for India because it has a large population and a vast payment system.
But this model may not be suitable for developed countries such as the United States, Canada, or Australia because their populations are small and their payment systems are streamlined. In contrast, developing countries such as Indonesia, Nigeria, or Kenya should choose a system similar to China’s.
Many countries do not need digital currency issued by central banks because they already use it. For example, the United States uses non-cash payment methods such as credit cards to make payments.
