China is arguably leading the world in developing a national digital currency. A digital yuan project he has been working on since 2014. So, this how the digital yuan works.
The People’s Bank of China (PBOC) has spearheaded work on the digital yuan, called the central bank’s digital currency (CBDC) to replace a portion of the cash in circulation.
Besides, trials are ongoing in the world’s second largest economy. These digital yuan are called Digital Currency Electronic Payments (DCEPs).
How to Use Digital Yuan?
Launching from CNBC, Friday (5/3/2021), how to use it is no different from the usual payment methods. Users can download digital wallets to save money which will later have QR codes to be scanned at each payment terminal in shops.
Digital yuan will be the legal tender in China and no interest is paid to users. The reason for this was that cash coins were considered complex and could easily be counterfeited for illicit purposes.
“The use of cash is decreasing. Eventually cash will be replaced by something in digital format. That’s one of the big drivers behind this,” said Yan Xiao, Project Leader for digital commerce at the World Economic Forum.
The digital yuan distribution will be carried out through two levels. This means that the PBOC will distribute the digital yuan to commercial banks to then be handed over to consumers. This could include services that allow consumers to exchange their coins and cash for digital yuan.
China has already given out millions of dollars worth of digital yuan in trials in cities including Shenzhen, Chengdu and Suzhou. This involved the local government handing out a number of yuan through a lottery. Users usually have to download a separate application to receive the currency.
JD.com, one of China’s biggest e-commerce players, is engaged in a trial run and allows customers to purchase items with digital yuan. Smartphone makers can also create digital yuan wallets for their devices.
“It is interesting to see how the telephone company seizes the opportunity to become a payment player in the market,” said Xiao.
Read now: Online Vs. Offline Market in China