Finances

6 Things to Know About China’s New Official Cryptocurrency

Img source: cpomagazine.com
Written by Quentin Hack

Cryptocurrencies serve as digital currencies that have easily become a source of investment and exchange across continents. They have allowed investors to park their funds for earning returns as well as use the same for exchange purposes. Every country has its separate laws for managing and regulating these cryptocurrencies.

Some have welcomed the same with open hands while others have imposed restrictions upon their active use and exchange. China is one such country that was apprehensive about the active use of cryptocurrencies due to their decentralized nature. However, they aimed towards using the technology to create their separate digital currency for hassle-free replacement of actual cash in the economy and to be used as the medium of exchange and retail payment.

Therefore, since 2014 People’s Bank of China has been working to create digital Yuan with an official name of central bank digital currency. The aim is to replace actual coins in circulation and even prevent the act of counterfeit cash. The digital Yuan will serve as an alternative currency for the people of China and make retail payments easier and faster.

The currency will serve as an official legal tender making it the world’s first digital currency where a central entity holds control over its exchange and supply. Moreover, the government offered the currency to its residents as a pilot project to understand the level of acceptance and to make it more understandable and accessible to the citizens.

The Chinese government even made Yuan Paygroup the official handler and distributor of the Chinese digital Yuan. They act as an official broker of the Chinese Coin that can be easily bought and sold by citizens of China and other countries as well. They serve as the leading organization for the distribution and exchange of the digital Yuan.

For more info check https://yuan-paygroup.com/

However, there are certain things That an individual must know about the new cryptocurrency as made and launched by the Chinese government. Some of these are listed below:

Img source: unsplash.com

1. Official cryptocurrency made by the People’s Bank of China:

The first and foremost aspect of cryptocurrency is that it has been made by the official central bank of China. They have been in the process of creating the same since the year 2014 and wish to use it as an alternative digital currency for their retail payments and exchanges.

Irrespective of cryptocurrencies like bitcoin, the digital yuan acts as an official digital currency for the citizens of China and can be used for normal retail payments upon launch. Moreover, the government possesses complete control over its distribution making it a secure and reliable form of currency.

2. Controllable Anonymity:

Another key aspect of the Digital Yuan is its underlying controllable anonymity. The government aims towards bringing financial stability into their economy through the adoption of digital yuan that will be strictly under the control of the Chinese government.

The payments and transactions through the use of digital yuan will be anonymous but the central bank through its digital analysis solutions can keep a control upon the same to prevent any kind of illegal activities. Moreover, the currency is completely centralized, unlike other cryptocurrencies that work on the principle of decentralization. The government would be able to monitor the flow of its digital currency and track the same easily.

3. Expiration date:

Another unique and coincidentally the most bizarre aspect of the Chinese digital yuan is that the currency comes with an expiration date. The government proposed the use of the expiration date on the digital currency which will cause the same to vanish if not spent on time.

The main aim behind this was to encourage Chinese citizens to increase their overall spending and therefore benefit the greater economy. Another benefit of the expiration date on the currency was to reduce the chances of illegal online activities.

img source: unsplash.com

4. The currency is completely backed by reserves of the central bank:

Digital Yuan, unlike other cryptocurrencies, is backed by the reserves that various commercial institutions and depositors pay to the central bank. This helps in keeping the deposits in the normal flow of banking and improving the overall stability of the financial system. The government imposed the same rule on other types of digital payment services to make them secure and more reliable for use by normal citizens.

5. Relatively stable currency:

Unlike other cryptocurrencies like bitcoin, the digital yuan is expected to be a relatively stable currency with zero price fluctuations. The government wishes to incorporate digital currency as a part of their overall monetary system thereby preventing high price volatility. Moreover, the currency is backed by central bank reserves and under complete control of Chinese authorities which delivers the necessary stability and prevents any kind of price ups and downs.

6. Touch and touch exchange system:

Similar to other types of digital currencies which are used in China, the digital Yuan is based on the same principle of touch and touch exchange system. Users can exchange currencies by tapping their smartphones, therefore, making the procedure highly convenient. The need for any kind of internet connection is also eradicated.

Users can keep the digital currency linked to their official bank account and use the same for making retail payments to shopkeepers by scanning QR codes at kiosks. Therefore, the government was able to convert a cumbersome procedure into a hassle-free one through the creation of their digital currency.

Img source: centralbanking.com

Conclusion

Last but not the least, the main idea behind the introduction of the digital Yuan was to encourage more bank-to-bank wire transfers in the Chinese currency. International payments are dominated by American currency i.e Dollar which the Chinese government wants to replace with their Digital Yuan.

Also, the currency will allow citizens of poor countries to make international payments with better ease and efficiency. The currency is still in the incubation phase and undergoing various steps of analysis and testing to improve its overall efficacy.

However, the Chinese government is making every possible effort to make the Digital Yuan a success through widespread adoption and acceptance by not only Chinese citizens but natives of other countries as well. It is a positive step towards a completely digital economy.

About the author

Quentin Hack