China, which is considered one of the largest economies in the world, has announced that it will launch its own form of digital currency for its citizens.
Reported first by the Wall Street Journal, this new digital currency called “digital yuan” will be fully controlled by the country’s central bank. However, it has marked differences from Bitcoins and other forms of cryptocurrencies. Unlike Bitcoins, it will lack anonymity and untraceable nature.
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Instead, it will provide a transparent perspective of the economy to the nation. According to a report by you, China’s digital currency has been in development since 2014, right after bitcoin started gaining popularity in the country.
Is China the only one with a digital currency?
China isn’t the only country working on a digital currency – central banks around the world have been developing their own form of digital currency. The United States is working with researchers at the Massachusetts Institute of Technology to develop its own form of digital dollar, Sweden has also developed and even conducted live trials of a digital crown. The Bahamas also have the ‘Sand Dollar’.
But China is the first massive economy to show off a working digital currency that is already rolling in several parts of the country, giving it a massive head start.
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It works like a wallet-based payment system
Bitcoins are not as easy to use as a credit card or cash. However, The Chinese digital yuan would work similarly to the existing payment app-based system that is common in the country with apps like AliPay or WeChat Pay. Users will be able to upload and store their funds in wallets and use QR codes to transact with people or vendors.
The idea behind the digital yuan is to eliminate the movement of cash – something that has already been drastically reduced in the country. However, this does not affect physical money which is invested in banks for the long term.
The amount will be distributed through commercial banks across the country. To take advantage of digital currency, banks will need to deposit specific amounts with the Public Bank of China.
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Early trials have been seen in Shenzhen and several other major cities across China with food delivery and ride-sharing apps. In the early stages, transactions with small amounts are allowed to be used using the digital yuan. However, the minimum amount remains to be determined.
China also this month announced the second phase of this trial where consumers can apply for the digital currency through their bank.
How will this help?
As digital currency becomes the norm, it will provide the government with better visibility into how money is flowing through the economy, while allowing it to track illegal flows of funds. It could also allow them to experiment with focusing monetary policies on specific economic classes and regions.
China has a broader goal of internationalizing its currency (just like the US dollar) and as its popularity grows, more people could be encouraged to use it as a form of currency to make payments at scale. world.
Read also : Visa allows users to pay using cryptocurrency, Ethereum and Bitcoin
Should India have a digital currency?
If India were to create its own digital currency, it would first need to ensure that it is the most secure form of currency, to prevent it from being fraudulently stolen. India, however, could face an even greater adoption challenge as even with UPI, many are afraid to link their numbers due to fraudulent callers and scammers.
The implementation of any future digital rupee will need to be robust enough to eliminate these issues. But if he manages to get the basics right, he could provide the additional transparency we need to root out the corruption and the movement of black money that has plagued India’s economy.