What is Digital Yuan?

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China banned trading its country's digital currencies, such as Bitcoin and stablecoins. Since then, it's been at the forefront of creating a national digital currency in 2014.

Digital Yuan, also known as e-CNY, is a digital currency that the Central bank of China regulates, and its primary goal is to replace other existing currencies in China. Ultimately, digital payments will replace cash since its use is decreasing rapidly.

Alipay and WeChat pay dominate China's digital payments arena. As a result, the Peoples Bank of China introduced the digital Yuan to boost competition in the payment space. In addition, private companies own Alipay and WeChat, so if they go bankrupt, it creates a systematic risk. You can safely buy a Digital Yuan at Yuan Pay Group.

Difference between Digital Yuan and Cryptocurrencies

There are significant differences between the digital Yuan and other cryptocurrencies. One of the most remarkable aspects is the digital Yuan's legal status since its position presents it as a legal tender. On the other hand, other cryptocurrencies, such as Bitcoin and Ethereum, do not have a centralized structure. Hence, no government entity or bank can control the usage of this digital currency. On the contrary, the digital Yuan currency has a state-formed centralized structure. The Chinese government regulates all the activities regarding the digital Yuan.

Anonymity is another distinguishing feature between other cryptocurrencies and the digital Yuan. Other existing cryptocurrencies provide the advantage of anonymity to varying degrees. On the contrary, the Chinese government monitors the use of the digital Yuan moving in its economy.

Reasons Behind the Introduction of Digital Yuan

The Peoples Bank of China introduced the digital Yuan for specific reasons. The main reason the PBOC introduced the digital Yuan was to develop a digital currency that could compete with other cryptocurrencies like Bitcoin, Ethereum, and Litecoin, among others. Remember that China banned the trading of Bitcoin and prohibited business owners from accepting Bitcoin payments.

The Peoples Bank of China also introduced the digital Yuan to reshape the current payment country's payment system by providing a cash-like digital payment method. This digital payment method would be accessible to all with low transaction costs. In addition, the digital Yuan provides controlled anonymity, reinforcing competition among payment service providers.

How Digital Yuan Functions

Aside from digital Yuan including adequate personal information, therefore, protection, it also keeps enough records for tracking illegal activities.

This digital Yuan is fully backed and regulated by the Peoples Bank of China, which has centralized the digital Yuan as money in circulation or as MO. MO is a language of central banks that states that the digital Yuan is a direct liability from the PBOC. The PBOC did not define e-CYN as M1 or M2 since it will include certain liabilities from commercial banks.

There are digital wallets in which consumers hold digital Yuan, which cannot be considered bank accounts. On the other hand, the Peoples Bank of China requires one to provide their mobile phone number to have a digital Yuan wallet. Moreover, only the banks can convert the digital Yuan into bank deposits.

On the other hand, the government has handled the digital Yuan project in two different stages: distribution and expenditure.

The Bottom Line

Overall, people can now clearly tell what China's digital Yuan, also known as e-CNY, is in total. The Peoples Bank of China created the digital Yuan to replace China's already existing legal coins and notes. However, only the people in China have legal access to this digital currency, unlike other cryptocurrencies accessible to everybody with internet connectivity.