Digital Yuan can become the next global currency

Digital Yuan can become the next global currency

The Chinese tech giants Alibaba, Tencent, and Ant Financial could be among the first major companies to adopt a digital yuan for payments across their ecosystems. More interesting facts and the process can be found in purchasing Bitcoin and Digital Yuan. China was reportedly planning to release a central bank-backed digital currency in 2014 that would enable real-time payments for consumers and businesses through the country’s banks.

 China’s move to develop a digital yuan supports the country’s ambitions to become the global leader in the fintech industry and one of the world’s largest financial centers, alongside Singapore and Hong Kong. If fully adopted, the digital Yuan would be issued by the People’s Bank of China and circulate alongside physical cash.

 The Chinese government aims to create a more modern financial system that would pave the way for developing “smart cities” and improve access and participation for lower-income citizens. In addition, a central bank-backed digital yuan would provide much-needed financial infrastructure in rural areas with few bank branches.

China becomes the key driver of monetary policies with the digital Yuan:

The International Monetary Fund (IMF) reported that China is expected to remain a key driver of progress in global monetary policy over the coming years. China’s management of money and banking services must be consistent with the country’s economic, social and financial development. While China is more developed, it still faces significant challenges in the financial sector, given its large population, rapid credit growth, significant informal sector, and increasing non-performing loans.

However, in 2017 China announced its commitment to include a fifth pillar to its banking system that would go beyond traditional banking services. The government aimed to establish a digital currency (digital Yuan) by 2020 to enable real-time payments for consumers and businesses with the help of banks by the entire project rolled out in 2021. It could open up a new revenue stream for Chinese banks and encourage increased competition among mobile payment providers like Tencent or Alibaba Pay. In 2015, Alibaba’s Alipay partnered with the People’s Bank of China (PBoC) to develop a stable digital yuan. 

What if the digital Yuan becomes a standard for the payment industry?

With the advent of such a new digital currency, those currently in the market – PayPal, MasterCard, and Visa – would be forced to implement changes that would bring them closer to global regulators. New technologies must comply with regulatory standards, and consumers will benefit from a more stable system with lower fees. Tencent recently worked on a blockchain system tracking a digital currency called We Token. 

PBoC’s mobile payments business would also wholly control consumer data in this new financial ecosystem. A digital currency could offer more scalability than the current card processing process and allow payment providers to implement new features without extra costs. Mobile payments would become even more personal and secure as users would be identified for making payments through their personal information. For example, Tencent’s WeChat Pay service allows customers to manually link bank accounts, credit cards, or debit cards to the app. With a blockchain-backed digital currency, merchants could accept payments directly with their bank account number, eliminating the need to enter sensitive information after each transaction.

What benefits can digital Yuan provide to the government of china?

Digital currency can be a viable alternative to cash in the case of China. The country’s economy is already being led by digitalization, with many consumers and businesses already turning to electronic payments for payments, especially for small-value transactions. Therefore, digital currency could facilitate and promote the flow of goods and services in the world’s second-largest economy.

 From the government’s perspective, digital money could be a means to reduce the role of cash in circulation, which reduces revenue from the seignior age (the difference between buying and selling rates). It would not only provide greater competition between financial institutions and payment providers but also bring more significant financial benefits to lower-income citizens who do not have access to traditional banking systems.

What will be the role of banks in the digital Yuan?

Banks are still likely to play a critical role in developing and implementing digital currencies as they provide essential infrastructure to support payments through their payment networks. Banks could also profit by having their customers access new services and improve transfer flows.

 

Share on Facebook «||» Share on Twitter «||» Share on Reddit «||» Share on LinkedIn

Read Related News On TDPel Media

Advertisement
Advertisement: Download Vital Signs App (VS App)