Author: Ku Yeun Shyun
Assistant Vice President, Golden Horse Investment Bank
- The use of the digital yuan will expand from sporadic retail scenarios to broader usage
- Smaller economies may want a diversified reliance on currencies with the help of new technological methods
- More than 20.8 million individuals in China have opened virtual wallets that store the digital currency
Diversification of global currency system weaken US dollar dominance.
The usage of digital yuan in China market is in the rising trend, especially in the public transport such as trains in East China’s Suzhou city and in Beijing where passengers are encouraged and allowed to use digital yuan to pay for their tickets.
Some latest trials rolled out by the Chinese government to apply digital yuan to the local real-life activities, include issuing digital yuan “red packets” to residents. Research from the Chongyang Institute of Renmin University of China, stated that the use of the digital yuan will expand from sporadic retail scenarios to broader use cases, including cross-border payments in future. The agency said the 2022 Beijing Winter Olympics probably will become the first trial event for digital yuan to be used in large-scale cross-border payments.
Digital yuan has now brought immense pressure to the global digital currency race. The Monetary Authority of Singapore (MAS) and Hong Kong Monetary Authority (HKMA) took the necessary steps to seek retail central bank digital currency solutions and study the feasibility of a digital currency respectively. One of the European Central Bank Governing Council members expressed the worry of the rapid progress in development of the digital yuan by China which poses a risk to the euro’s monetary sovereignty. He urged European policymakers to accelerate their own digital currency plans.
Experts also pointed that the rise of digital currencies would diversify the global currency system, as many small economies may want a diversified reliance on currencies with the help of new technological methods, such as currency digitalization.
China’s Digital Yuan Trial Reaches $5.3 Billion in Transactions
China’s digital yuan trial has reached 34.5 billion yuan ($5.3 billion) in transaction value as the central bank continues to outpace global peers in developing a virtual currency.
According to the People’s Bank of China (PBOC), there are more than 20.8 million individuals in China who have opened virtual wallets that stores the digital currency and have made more than 70.7 million transactions in the trial. The central bank has basically completed the research and development of the design and function of the digital currency. Technically, the agency notices the feasibility of digital yuan for cross-border transactions but it will remain for domestic retail purposes for now. The PBOC will explore cross-border trials based on overseas demands and will respect other countries’ monetary sovereignty in the process.
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