China soon to launch its sovereign digital currency
Beijing, 4th May: China is set to start the major trial of its first state-run digital currency in four major cities from next week.
According to the report of Baaghi TV, China’s Central Bank has stepped up its development of the e-RMB, which is supposed to be the first digital currency operated by a major economy.
It has reportedly begun trials in several cities, including Shenzhen, Suzhou, Chengdu, as well as a new area south of Beijing, Xiong’an, and areas that will host some of the events for the 2022 Beijing Winter Olympics.
According to the State-media outlet China Daily, some government employees and public servants will start receiving their salaries in the digital currency form from May, after it is formally adopted into cities’ monetary systems.
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China is already using the digital payment modes in different platforms like Alipay, owned by Alibaba’s Ant Finacial, and WeChat Pay, owned by Tencent, but they do not replace existing currency.
Some reports also claim businesses including McDonald’s and Starbucks have agreed to be part of the trial, however, in a statement, Starbucks told the Guardian it was not a participant. McDonald’s been contacted for comment.
Xu Yuan, associate professor at Peking University’s national development research institute, told broadcaster CCTV that because cash transactions were offline and transaction data from existing payment platforms was scattered, the central bank was unable to monitor cash flow in real-time.
“Although there is little change from the perspective of user use, from the perspective of central bank supervision, future forms of finance, payment, business, and social governance, etc, this is the biggest thing ever.”
On 17 April, the digital currency research institute at the People’s Bank of China, which is developing the system, said the research and development of a digital renminbi were “advancing steadily” and top-level design, functional research and development, and debugging had largely been completed, according to a CCTV report.
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Facebook’s announcement on the 1st of June to launch its own digital currency spurred the progress in China reportedly.
The sovereign digital currency has been under development for some years, but in August the bank announced that it was almost ready. However, the following month the bank’s governor said that there was no timetable for its release.
“A sovereign digital currency provides a functional alternative to the dollar settlement system and blunts the impact of any sanctions or threats of exclusion both at a country and company level,” last week’s China Daily report said.
“It may also facilitate integration into globally traded currency markets with a reduced risk of politically inspired disruption.”
Due to the coronavirus pandemic, people avoid physical contact and a decline in the use of cash is expected to continue, hence the growing popularity of digital payment platforms will rise.
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