Established in 1898, the PBoC (People’s Bank of China) is the Central bank. It is charged with carrying out monetary policy for China and maintaining financial stability. If you are interested in Digital Yuan, you must try Yuan Pay Group App.
For example, Alipay’s total mobile payments amounted to $4 trillion in 2016, more than seven times higher than that transacted through credit cards worldwide. CBDCs have therefore been introduced as a solution to replacing paper money, upgrading IT infrastructure supporting it, and providing efficiency gains for banks. Specifically, in China, the PBoC’s plans to introduce “e-yuan” as a substitute for the traditional paper yuan are succeeding as citizens happily use this electronic alternative.
Impact of money digitization in china
As China is the world’s largest economy, this movement could have significant consequences across the globe. It could potentially change how people and businesses save, pay, and borrow money and fundamentally shift the power dynamics of global finance along with it.
The user could also leverage the technology to support social welfare programs by making financial services more accessible: digitalization can give unbanked groups access to financial services in remote locations via smartphone-provided internet connections. The digitization of money into a digital currency could have tremendous implications globally.
For example, the time it takes to send money from one country to another is expected to be reduced by more than half when using CBDCs. There are also advantages involved in cutting down on the high costs associated with printing physical currency today. For example, the United States government spends approximately $8 million daily to maintain its printing services.
Since many use physical cash as a store of value, it may be seen as an illiquid asset and potentially cause short-term shocks to asset prices if CBDCs were introduced suddenly. However, since CBDCs are directly tied to the cash reserves of the issuing Central Bank, the risk of a liquidity crisis is minimized. Even though a CBDC could technically be issued in any fiat currency, in most cases, it is expected to be pegged to the national currency and backed by Central Bank reserves.
Bitcoin and other cryptocurrencies have gained tremendous popularity as an alternative asset class. For the mass adoption of digital currencies, governments and regulators must support cryptocurrencies and make regulations supporting their use possible.
Digital Yuan removes reliance upon the dollar
The move by China to adopt the digital yuan as a reserve currency could positively affect the financial system both globally and within China. For example, suppose CBDCs are supported, and government regulations can be made applicable. In that case, we could see a shift in global standards in how transactions are carried out, essentially similar to what happened with the advent of bitcoin back in 2009. Moreover, the creation of the e-yuan could lead to a new global economic order in which the Chinese Yuan will be the dominant reserve currency.
One could argue that electronic currency could remove China’s reliance on the USD, strengthen its economy, and give it more control over its monetary policies. It creates an opportunity to create national digital currencies supported by their respective government and accessible to citizens using digital devices such as smartphones. The removal of the reliance on the USD could promote stability within the Chinese economy, as well as its financial system, and may help it emerge as a new superpower in the global economy.
For example, according to ABC (Australia’s Business Channel), on 17 September 2016, China was named the world’s largest issuer of green bonds for 2016 at $17.2 billion. China was also the top issuer of green bonds for 2015 at $14 billion.
Can digital yuan decrease the use of physical notes?
Creating an e-yuan could potentially decrease the number of paper notes in circulation. For example, back in 2013, when the Japanese government began to create its digital currency, it encountered a few initial problems regarding the physical currency. Specifically, there was a sudden surge in demand for ¥1000 bills as citizens began to worry that they would not be able to access the new digital currency. As a result, it resulted in a sudden shortage of paper yen, leading to longer waiting times at ATMs and banks. However, this problem is also likely to be solved once citizens are more acquainted with digital currencies and become more comfortable using them instead of cash.