China has finally taken a dip into cryptocurrency mania. According to the official statement issued by PBOC (People’s Bank of China): the official digital Yuan would be launched publically today in the city of Chengdu. Six prior trials of DCEP (Digital Currency, Electronic Platforms) have already been carried out successfully in other major cities of China like Beijing, Shenzhen, and Suzhou. The digital Yuan can be used for online transactions, rides booking, smart wallets, brick and mortar stores, and ATM machines.
The PBOC has publicly issued statements announcing a joint venture between central banks of UAE, Hong Kong, and Thailand to encourage digital Yuan’s international transactions. On the other hand, existing E-money wallet service providers in China like Wechat pay and Alipay are also preparing for the competition from the DCEP.
There are some visible advantages of the DCEP digital Yuan over simple online payment platforms such as:
- DCEP is not just a transaction wallet for money transfer; it is state-approved currency.
- The use of DCEP is free of cost thus far, unlike other payment platforms that charge a service fee.
- DCEP or E-CNY has the status of legal tender in China, which makes it a mandatory mode of payment, unlike Wechat pay and Alipay.
- The Chinese government would be in a better position to launch suitable monetary policies based on the statistics covered by the DCEP.
- Law and order authorities would be able to have a better grip over money trials with the help of special access and privileges of DCEP.
- People would be able to use E-CNY in internet-free zones and without smartphones which WeChat pay and Alipay are not able to facilitate to its consumers.
- Due to the in-process International digital transaction framework, the digital-Yuan may be able to break the supremacy of the USD in the international trade market.
Despite internal and external pressures, Chinese Central Banks are quite optimistic about the digital Yuan due to the positive trials carried out in major cities of China, according to Liu Xiaochun, former president of Zheshang Bank. Alipay and Wechat’s parent companies have already made a move by filing patents on digital transferring platform protocols like digital currency delivery, account supervision, digital currency wallets, etc.
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According to the PBOC, the launch of DCEP is not going to affect the presence of local digital payment transaction companies. The E-CNY is more likely to act as a cash commodity that could be transferred with the help of these online transaction services. The PCOB officials are currently working on a two-tier plan to launch digital Yuan in the market. According to this plan, commercial banks would turn some of the central bank deposits into DCEP and issue them to the consumers in the fashion of physical cash distribution.