The People’s Bank of China is progressing rapidly with its goal of developing a Central Bank Digital Currency (CBDC), its own Digital Yuan (e-CNY). Several trials have been conducted on the digital Yuan and these trials have been successful so far.
Mu Changchun, the Director-General of the Digital Currency Institute of the Chinese Central Bank, revealed that the Digital Yuan project has seen over 62 billion yuan ($9.7 billion) in transactions so far. This information from Mu Changchun was reported by Reuters.
Race to Develop Central Bank Digital Currency
Many Central Banks across the globe are working tirelessly to develop a government-issued Central Bank Digital Currency and this is seen as a matter of great importance by many Central Banks. There are several motivations behind this rush to develop Central Bank Digital Currency by many countries.
These include the desire to limit the growth of private cryptocurrency and stablecoins outside the control of the government, and also to meet the need for a faster and cheaper system of payment. There are over 110 countries that are working to develop their own Central Bank Digital Currency to satisfy various agendas.
However, the official launch of a Central Bank Digital Currency has been done only by a few countries including Nigeria and the Bahamas. The Digital Yuan Project being developed by the Chinese government is considered the most advanced among all the major countries developing their own Central Bank Digital Currency. Several pilot tests have been performed on the Digital Yuan and currently, Digital Yuan wallets have been opened by over 140 million people.
Mu Changchun also confirmed that the official date for the launch of the digital Yuan is yet to be announced by the government. Digital currency is currently being integrated among the retail businesses at a rapid rate and over a million merchants in the country can receive payments via their Digital Yuan wallet. There is a wide range of use for digital Yuan including paying for utilities, transportation, and various government services.
Clearing the Way for the Digital Yuan
While there is advocacy for healthy competition within the financial market, the Central Bank of China seems to disregard this idea with the government taking action to reduce the growth of privately issued cryptocurrencies such as Bitcoin and altcoins in the country. This is despite the cryptocurrency providing a fast and efficient system of payment.
The government prepared the way for its digital currency by banning cryptocurrency mining and transactions within the country. The regulation pushed a lot of Bitcoin miners out of the country into other more friendly countries. Also, major trading platforms such as Binance, FTX, etc are shutting their operations within the country due to this ban by the Chinese government.
All these actions by the Chinese government support the idea that the Central Bank wants to create an easy environment for the Digital Yuan when it is launched. The banning of cryptocurrency mining and transactions in the country has eliminated competition for the digital Yuan and hence ensuring a greater chance of success.
The Digital Yuan has some similarities to the stablecoins, however, the Central Bank Digital Currency is centralized which is in contrast to the decentralized stablecoins. This centralization of the digital Yuan could be a drawback especially for those aware of the potentials of Bitcoin.