The Digital Yuan is set to be available to the general public by the end of 2022, to make it utterly cashless by 2030. The website Yuan Pay Group will assist traders. The release of the Digital Yuan is part of China’s effort to achieve its national innovation goals set in 2016. They are striving for an entirely cashless society and have plans to promote and develop online payments that would allow payments without going through bank accounts or credit cards.
It is an important step forward in their efforts toward global economic development and financial dominance. While the move could be seen as pushed by more recent concerns over personal data protection, it is hoped that the increased convenience will outweigh any uncertainties about how a digital currency could affect privacy protections.
The digital currency has been developed by the People’s Bank of China and is currently in the testing phase. The bank added that they are also working to make payments more convenient by updating mobile payment platforms and exploring the potential of applying blockchain technology to financial services.
China wants to encourage financial service tools:
China wants to encourage new financial services tools and create a platform for open data sharing among those who rely on public services. Furthermore, digital currency would be used as part of these developments, providing a new avenue for participating in e-commerce transactions and broadening the scope of online payment methods. Chinese banks are already experimenting with the new currency, and some plan to begin offering it as a new payment option in 2024.
The goal is that by 2030, all banks will stop processing payments by cash and cards. It will boost the country’s economy and make it one of the leading countries in digital currency usage. It allows for greater financial inclusion, making it more accessible for the general public to invest in cryptocurrencies or other alternative digital currencies without needing a bank account. The government will not allow bitcoin trading at exchanges and fund transfers, with banks handling transactions on behalf of specific market participants.
The Digital Yuan will ultimately become the world’s largest digital currency.
The yuan is being set up to be a global currency, not just in China, as they hope other countries could eventually adopt it. The digital yuan will be an alternative to US dollars, the Japanese yen, and the euro. In addition, it is expanding non-traditional payment methods like mobile banking and peer-to-peer payments. It will allow more people to participate in digital currencies without needing a bank account. The marketing of this new currency is also expected to boost mobile payments and cross-border transactions and trade, which is essential for any economy that wants to diversify its export market, mainly when it depends on the US dollar being accepted as payment.
China wants its rural villages to go cashless by 2022:
China has been working on a strategy to promote mobile payments for the past two years. The goal is to ensure that payments are made through a mobile device in every Chinese village by 2022. In addition, China’s central bank is encouraging the use of cashless transactions to help make the country an economic powerhouse, promoting urbanization and eliminating barriers to international trade. It is possible by implementing more financial services tools, better access to rural markets, and providing more support for state-owned companies.
The Digital Yuan will help decrease global dependency on US dollars and make it easier for countries like China to conduct international trade and grow their economies. However, it can be a significant hurdle for smaller countries with fewer resources and cannot compete easily.
China is known for its vast reserves of gold, which can help stabilize the yuan’s value and reduce reliance on foreign currency assets. China’s central bank has now been accumulating gold at an accelerating pace. They recently surpassed Russia to become the biggest holder in the world of physical bullion. While China’s central bank is adding to its gold reserves at a record pace, reserves are still only a fraction of those owned by the US Federal Reserve or European Central Bank.
A cashless society powered by the digital yuan will have lots of benefits:
Low cost of operation, security, and automated transactions will be the main benefits of using a digital yuan. In addition, it is expected that faster and cheaper transactions will speed up business and help expand the number of businesses accepting digital currency payments. Several international businesses are already accepting it as a form of payment, such as online retail giant Amazon and Xiaomi, one of China’s largest smartphone makers.
The Digital Yuan would be completely self-contained, eliminating the need for paper bills, coins, or notes. It means that people can spend virtual money without worrying about getting their money mixed up with the real currency in the system or losing it if they lose their physical cash.