Chinas Digital Currency- A New Step to Cashless Future

Feb, 2021 - By SMI

China have become the first country to develop an Electronic Payment method. The trial of this digital currency is already done and is rolling out in some major e-commerce platforms.

This digital currency is the digital version of China’s national currency, Yuan. This electronic payment is supported by Yuan’s deposits held by the central bank of China. This process has been under development for more than 5 years. During this time, banks were asked to convert a portion of their Yuan holdings to digital. The banks were asked to transfer the digital currencies to small business and citizens via mobile transfer. The main difference between this digital currency and other crypto currencies is their legal status. The digital currency differs from other crypto currencies because it is legally approved by the government. This digital transformation of the currency will help China bring its unbanked population into the mainstream economy. It will also help the Chinese government to go cashless. There are many other differences between digital and crypto currencies. The digital currency refers to decentralization whereas the crypto currencies refer to centralization which means that their economies are not controlled by a single entity.

The digital method helps the Chinese government keep a better record of the cash outflow in the economy and also make wise decisions. The new method of money relies on digital transfer through various modes such as mobile services, QR codes and token system. China has the largest number of people without a bank account. This new mode of payment will allow the people to participate more in the mainstream economy. The U.S. dollar still holds 88% of the all international settlements while China holds only 4%. This new method of payment is expected to keep a fast track of international settlements.