Since last summer, the number of people using China’s new digital currency has risen dramatically, as central banks across the world consider releasing their tokens to speed up payments and compete with bitcoin. More than 140 million individuals have opened wallets for the new digital yuan, which has been used for 62 billion yuan ($9.7 billion) in transactions as of the end of October.
China has been putting the china coin to the test in a number of regional pilot projects and trials. According to Mu Changchun, director-general of China’s central bank’s digital currency institution, “there is no formal launch date for when the eCYN will go countrywide.” eCYN wallets are currently accepted by 1.55 million retailers, according to Mu, who spoke at Hong Kong’s “Fintech Week” conference.
A total of 10 million business accounts have been created in addition to individual accounts. China has taken significant moves to push its eCYN while also tightening down on cryptocurrencies that are not controlled by the government. After chasing away bitcoin miners, Beijing outlawed cryptocurrency transactions in September. CBDCs have the potential to save global companies up to $100 billion per year in cross-border transaction expenses.
Benefits Of Digital Yuan
According to Hampton Group CEO Andrew Methven, “the creation of the china coin would allow China’s central bank to have a stronger footing in, and hence control over, China’s digital payments environment.” Hampton Group specializes in China-related challenges, stakeholder involvement, and cross-cultural communication. China’s digital currency development would allow it to pull some of its unbanked citizens into the mainstream economy, better track money movements, and combat financial crime.
Once digital money is available outside of China, cross-border payments will become much easier. It may also increase the yuan’s influence because it will stay under central bank supervision. This is especially true given China’s ambition to build the Belt and Road program in the Middle East and Africa, which opens up new markets for the digital currency to be used in trade transactions.
Renminbi, in both digital and bank balance forms, requires the assistance of well-developed financial markets with adequate complexity and liquidity, as well as being completely convertible, to be utilized as a reserve currency. Internationally, the growth of the digital renminbi is unlikely to lead to the renminbi being a major reserve currency in the near future.
Companies in China and the fintech industry are expected to be among the first to benefit from this. The digital renminbi will make it simpler for businesses, particularly small and medium-sized businesses, to obtain funding, since banks will have a better understanding of how businesses would use loans, lowering financial risks.
In the long run, the digital renminbi will digitize all aspects of the yuan, including issuance, circulation, storage, and possibly investment and cross-border flows, providing an infrastructure for fintech firms to process data using technologies such as big data, blockchain, and artificial intelligence. With the introduction of the digital renminbi, the fintech industry will make significant progress.
And the timing is excellent. China is launching its digital currency at a time when the country’s digital economy is rapidly expanding. According to Zhao, China’s digital economy accounted for more than 30% of GDP in 2020 and might account for half of the country’s GDP by 2030. The digital currency, which will be issued by the central bank, will be the ‘cash’ within digital wallets given by the major online payment companies.