China's Digital Yuan And What It Means For Bitcoin
January 26, 2021 (Investorideas.com Newswire) The government of China has not been too kind to cryptocurrencies in recent years. The initial coin offerings (ICOs) were the first target to fall prey to China's crypto wrath back in September of 2017. Not long after the crackdown on ICOs, exchange platforms that traded cryptocurrencies or even provided facilitation to them, were next in line to be struck down under the ban with authorities ordering immediate closure.
Such drastic steps made the purchase of bitcoin in China close to impossible for investors. However, this act was not merely a blanket ban but rather, preparation for the things to follow.
While central banks and financial regulators around the world grapple with the meteoric rise of bitcoin over the last decade and their inability to control these digital currencies as they do the fiat currencies, China has its own plans for the digital future. It is working hard towards becoming the first country to implement its own Digital Currency Electronic Payment (DCEP) system.
By outlawing other entities with the country from issuing cryptocurrencies through means of the ICO ban and limiting the exchange of Bitcoin, the People's Bank Of China (PBOC) has been paving the way and setting up the stage for the success of its own digital yuan.
Bitcoin And The Digital Yuan.
Now even though the digital yuan is backed by the PBOC, there are still a number of ways in which it cannot compete with Bitcoin. In fact, some investors don't even consider the digital yuan to be a cryptocurrency.
The digital yuan, much like the traditional paper yuan, is not decentralized, which is the stand out quality of cryptocurrencies like bitcoin that has been one of the key drivers in their success. And so, the digital yuan will not leverage a public, blockchain, distributed ledger technology that allows the transactions to be validated without the need for third parties such as banks.
There are two dominant reasons why the PBOC is unwilling to run their digital currency on similar grounds and technology of Blockchain.
Firstly, the massive population of China has led to many experts doubting if any network will be able to handle the enormous volume of daily transactions. Secondly, the decentralization and transparency inherent in blockchain technology are unacceptable aspects to the Chinese government and financial regulators. Hence, the digital yuan is China's attempt to meet in the middle.
This digital currency will allow the PBOC to control bank lending much more closely and also direct funding where it deems appropriate. But one thing is certain: the centrally bank controlled digital yuan will never be able to truly compete with the value propositions of Bitcoin.
Moreover, unlike popular crypto coins such as Bitcoin, dealing in the digital yuan won’t protect any presumption of pseudonymity, and on top of that, its value will be as stable as the physical current issued by the government; something the Bitcoin will always struggle achieving.
China has conducted pilot tests for the digital yuan. Many of these trials have taken place in four cities, namely Suzhou, Shenzhen, Chengdu, and Xionggan via a lottery system. The reported results of these tests have been quite positive. But no announcement has yet been made in relation to the availability of the digital yuan and its payment network to all citizens.
The YuanPay Group is a platform that has been working closely with the Chinese government for the distribution of the country's first national digital currency. It is allegedly the only authorized company that currently offers the possibility of exchanging Euros or any other fiat currency into digital Yuans.
This digital currency is expected to follow the same path as Bitcoin did after its inception, back when a Bitcoin was only worth a few pennies. Today, it is worth thousands of dollars, giving hope to potential investors and supporters that one day the digital yuan could be in the same spot. If you're looking to jump on the digital yuan bandwagon, visit https://yuanpaygroup.org/
China is already becoming an increasingly cashless society, with many people making use of mobile wallets such as AliPay and WeChat Pay that have a large user base. Even street-food vendors in China prefer to use payment apps instead of using cash.
But because the citizens are so used to using such programs, it is unlikely that they will switch to a government overnight. However, at the same time, people may find the concept of digital yuan more interesting and be inclined towards using it especially since there will be no fees involved with the digital yuan.
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