Chinese first used paper money from the Tang Dynasty, 14 centuries ago. Currently, the world’s most populous country has just taken a turning point with the introduction of the digital yuan test. Not only is it expected to revolutionize the payment method in China, Chinese cryptocurrencies can transform the global financial system and create a new definition of money.
At the moment, China is leading the world in cashless payments. However, this type of payment is supported by private companies. With the launch of the digital currency, the Chinese government will officially enter this new field and take it to the next level. Money in e-wallets will officially be money, not equivalent. It has a 1: 1 exchange rate with the traditional currency.
During the recent Covid-19 epidemic, China had to recover billions of banknotes to prevent the possibility of Covid-19. Traditional money goes through a strict cleaning process to get rid of the corona virus attached to them. If using cryptocurrencies, China will not need to waste effort to go to the toilet.
However, that is only part of the problem. Cryptocurrencies can help China create a revolution in online shopping, a form that is increasingly popular in the world’s No. 2 economy. China has poured a lot of money into the Belt and Road Initiative with the ambition to link infrastructure projects in more than 60 countries together. Cryptocurrencies can take the Belt and the road a step further.
Where the Belt and Road goes, there are lots of consumers and small businesses unable to access banking services. They are almost unable to convert currencies or, worse, stay in an economy where the value of their earnings changes. Therefore, the digital currency may attract the attention of these people, especially as China strengthens its influence in the areas where the Belt and Road passes.
The digital yuan will make countries’ business relationships with China more convenient. The fear of losing money when exchanging foreign currencies will disappear. The cost of making transactions is also cheaper when users do not even need the Internet to transact. According to some sources, China wants to develop for its digital currency the ability to transfer via bluetooth, NFC or other streaming features on the phone.
Over time, China’s digital currency is likely to become increasingly influential globally. Besides, it also gives Beijing the opportunity to challenge the dominance of the dollar, which gives the United States great advantages in economic and geopolitical issues around the world. It is also an opportunity for China to realize the superpower dream it is pursuing.
China is surpassing all other countries in launching a national digital currency. The world’s second economy has been left behind Singapore, Canada and Switzerland, which are pursuing their digital currencies.
China has just conducted digital currency testing in four cities including Shenzhen, Suzhou, Chengdu and Xiong’an – a smart city in the process of finishing. This is the result of a research process that began in 2014, when the world became aware of Bitcoin and other cryptocurrencies thanks to their price increases.
Bitcoin was supposedly invented by Satoshi Nakamoto in 2009. Built on the blockchain platform, Bitcoin is expected to create an entirely new payment method. However, a series of issues such as slow transaction processing speed and exchange rate fluctuations so strong that Bitcoin is far from being able to reach this goal.
Chinese cryptocurrencies have avoided the trails of Bitcoin and other cryptocurrencies. Distributed by the Government through traditional banks and the monetary system, China’s digital currency is centralized and issued in exactly the same way as paper money. However, its exchange rate is guaranteed by the Chinese currency, so it can never be unjustified.
The Chinese government also controls its digital currency and only China can issue it. However, the digital currency is capable of processing 300,000 transactions per second, making it feasible when used for large-scale payments. In fact, China’s digital currency seems to be developed on many technologies rather than blockchain.
Upon announcing the plan to issue a new currency, Central Bank Governor Yi Gang emphasized that they did not create a new currency like Facebook’s Bitcoin or Libra, but only partially encrypted the cash saved. Chinese Onions. It also does not replace the other tasks of money but allows banks and fintech companies to pay together more easily.
With its trial run, China is surpassing all other countries in launching a national digital currency. The world’s second economy has been left behind Singapore, Canada and Switzerland, which are pursuing their digital currencies. A society that is becoming cashless in China continues to help Beijing move faster than other countries.
The digital currency also allows the Central Bank of China to monitor transactions, something they cannot do with cash. According to Chinese officials, this helps to prevent money laundering, illegal gambling and terrorist financing. However, in the long run, this currency can be used to improve the efficiency of transactions on the financial system.
However, further, cryptocurrencies can help China reduce contact with US financial institutions, making it less vulnerable to sanctions that the US threatens to impose, such as joint regarding the Hong Kong issue. Countries that already have disagreements with the United States will certainly be willing to use such a currency.
In the long run, cryptocurrencies give China the central bank another payment mechanism for cross-border transactions between countries. This helps them no longer have to depend on clearing in USD. Unlike the traditional currency, the digital currency helps China to compete fairly with the USD on a global scale.
The US shows that it is not willing to develop a digital dollar at the present time. Meanwhile, crypto projects such as Facebook’s Libra or Telegram’s TON are facing a series of legal obstacles in the US. The ability to compete with the role of the US dollar makes US lawmakers not ready for a cryptocurrency not controlled by the Fed.
However, Facebook founder Mark Zuckerberg also warned Congress that when the company’s Libra project was blocked, it could lead to China overtaking the United States in financial innovation as well as global influence. Mark also warned that China would soon offer a similar currency and that became a reality.
When rivals are slow, China has seized the opportunity to create a tool that can threaten the dollar’s position and lie entirely beyond the ability of US intervention. Beijing is also outperforming countries that are cherishing plans to launch their own digital currency. Going ahead and, if successful, the advantage China has is not least when the benefits of a digital currency are proven.
However, Libra and TON may still have a chance. Currently, despite being rejected by the US Congress, Libra is still quietly operating and the presence of Singapore’s state investment fund Temasek is the latest evidence that Facebook’s project is still an impossible opponent. despise.
Meanwhile, Libra is backed by a basket of currencies, such as the US dollar and Euro, making it more advantageous when Chinese currencies are only supported by currencies. Facebook has also stated that it wants to bring Libra to the world, while China’s digital currency, which is under the control of the currency, may be difficult to leave China or take time to do so.