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Tuesday, November 22, 2022

CHINA IS THE FIRST COUNTRY TO LAUNCH A DIGITAL CURRENCY EVER!

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Digital currency is aimed at individuals and businesses and has the potential to be a revolution in payments. You can see a review to know about Auto-trading bot and begin bitcoin trading with the right tools, trading strategies, and guidance from experienced traders. China is demonstrating the first vertical take-off of a CBDC by launching e-CNY as soon as possible to pave the way and is advancing a new concept of “digital currency” that combines central bank control with local use and control.

The bank has decided to issue a digital currency using distributed ledger technology (DLT) to achieve these goals. However, China’s leading bank – the People’s Bank of China – will likely have technical problems scaling up. In the past, there were often many problems with digital currency transactions. 

The transaction time has been long, and the cost is relatively high, which limits the currency’s application in circulation. But China’s central bank sees an opportunity for CBDC to reduce these costs for its economy. For example, lower costs can improve incentives for businesses to trade across China’s borders and invest in new technologies.

Blockchain-infused digital infrastructure: 

The digital currency will be valuable because it is available through blockchain networks and embedded into other mobile applications and communication tools like WeChat and Alipay for individual users who prefer a mobile wallet to carry out their day-to-day purchases. It will allow millions of people in China to become part of the digital currency ecosystem, which could be a more significant breakthrough for mobile financial services than anything else in recent years.

The bank will encourage the application of ‘e-CNY’ and, at the same time, gradually improve its settlement function and actively push related research. The ultimate goal is that any ‘e-CNY’ token in circulation can be converted by people to CNY anytime and anywhere.

Because blockchain is transparent and traceable, and the value exchange mechanisms between e-CNYs stored in different wallets are recorded accordingly, it is possible to trace each transaction stage through a blockchain explorer website. Furthermore, unlike traditional payment methods, e-CNY will not be exchanged through a bank account and does not require banks to do so. 

We believe that e-CNY can change the status quo of digital currency and accelerate the development of CBDC. However, we also believe that we must explore various possible directions in figuring out how to integrate this CBDC into Chinese Internet culture as soon as possible.

Digital Yuan to decline the movement of cash:

However, the country has already undertaken many efforts to see cash as substantial as paper and has made tremendous progress in reducing the use of cash among people.  It is commonly known that the Chinese people have increasingly shifted towards digital payment instruments. Therefore, in 2016, the People’s Bank of China (PBOC), along with the Ministry of Justice, the Ministry of Public Security, and other ministries and departments, began reforming the Yuan financial system. 

The reform gradually launched the conversion from CNY to ZB for domestic transfers, conversion to RMB for foreign transfers, and issuing of electronic payment guarantees and settlement certificates. China’s most substantial bank, the People’s Bank of China, is tightening its control of cash circulation and cutting holdings. Countries where CBDC will be successful need to have a large amount of cash in circulation. If a country gets rid of paper money, it will become a more accessible subject to theft.

The number of CNY exceeded 100 billion for the first time:

China’s new Treasury bills (T1), which central banks issued, reached a record high of 100 billion in 2016. The number was expected to rise to 200 billion in the next three years and even further after that, reaching nearly half a trillion in 2022. In addition, China has been conducting a trial for using its national digital currency, also known as the “digital yuan”. This kind of virtual currency or credit money is created by Internet users and monitored by banks, called “decentralized virtual currency” or “network currency”.

The potential benefits are that such currencies appear secure and less prone to counterfeiting. Most countries do not need a central bank to guarantee their value and supply.  However, it is unclear whether a currency will see widespread use if people in the real world cannot use it.

China’s PBOC announced in December 2021 that they were looking into integrating CBDC with Alipay, the country’s most popular mobile payment system. The CBDC could also serve as payment on board aircraft and trains.

Currently, Alipay only supports CNY and has no support for other currencies or countries’ currencies (such as USD). CBDC allow Alipay users to buy goods directly using their mobile payment system without having to exchange the currency at the ATM.

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