The various national media outlets in China report that the Electronic Yuan is getting more robust with broader adoption. The government will shortly unleash a new wave of usage and influence at an increasing pace as technology catches up with demand.
Bank of China is opening its systems to the public to allow electronic payments via WeChat Pay. As a result, the usage of WeChat Pay has become increasingly widespread among the Chinese population, with more users than ever making contactless payments, up from 1.25 billion at the start of 2014. Like Digital Yuan, you may also want to know about Bitcoin and Cash, the reason why Bitcoin is better than cash nowadays.
Visa is working with China Union Pay to expand the use of digital currency in China through blockchain technology. Currently, Visa users in China can make instant, secure, and anonymous cross-currency payments with Union Pay. In the future, Visa will be able to accept payment from Union Pay and payout to other Visa cardholders via blockchain technology.
Low transaction cost with digital Yuan:
China has been keen on developing a CBDC because of the low transaction cost with digital currency. In an announcement, the People’s Bank of China said: “The development of the digital currency has to a large extent enabled the rapid growth of mobile payments and Internet finance.” The bank also said that several emerging technologies such as blockchain, distributed ledger, smart contracts and extensive data analysis had given rise to new business opportunities for digital currency.
The principal value of a digital currency is that it allows users to complete online payments conveniently and quickly. However, China is targeting a comprehensive upgrade of the financial technology sector by 2022.
The announcement also said that digital currency would be widely used by people in areas including mobile payments, credit and traditional banknote replacement, securities settlement and personal identity verification. In this regard, it has been proposed to gradually expand the application scenarios of digital currency to facilitate its widespread use in China’s daily economic activities.
REAL-TIME CROSS-BORDER TRANSACTIONS:
In a related development, the PBOC has reported that it will start real-time cross-border payments. In addition, the Chinese bank will conduct live trades with 10 other central banks via a cloud-based digital currency platform based on blockchain technology.
China is aiming to become the world leader in blockchain technology by 2024. A digital central bank currency can facilitate seamless cross-border transactions completed at almost zero cost, thus boosting trade and investment.
It will also make remittance between China and other countries cheaper and reduce the massive capital outflow from China. Currently, 85% of yuan payments are made in physical forms, such as through checks or demand drafts, which are expensive and time-consuming. In the future, most transactions will be made over the internet and completed in real time.
The Bank of China has already established a system for digitizing banknotes, which can be used for highly efficient cross-border transactions. It will assist the Chinese government in controlling capital flows and, at the same time, protect the interests of investors.
By introducing a digital currency, the PBOC can make domestic payments faster, more convenient and cheaper. It expects that its new version of WeChat Pay will significantly facilitate trade across borders by cutting transaction costs and processing times.
Simultaneously, it is encouraging mobile payment companies to develop innovative services based on blockchain technology to help create more value for consumers while reducing transaction costs.
Easier-to-scale digital infrastructure:
China is an ideal place to develop blockchain technology due to the enormous enthusiasm that local investors have for the new technology and digital currency. In addition, China has already been developing digital infrastructure for payments and settlements by creating a digital version of its national currency.
The PBOC will encourage different payment service providers to apply their existing networks and build new ones on blockchain technology. They will also encourage foreign financial institutions to open RMB clearing accounts with Chinese banks and clear RMB cross-border payments in China through the interbank market. In this way, with blockchain technology, financial transactions can be made much easier and faster than before.
Internationalization with digital Yuan:
In principle, the PBOC will encourage digital currency to be used for cross-border transactions for customers from other countries. For example, it is possible to make it possible for companies that use RMB to accept payment in other countries with digital currency. However, the PBOC will not allow its citizens to use digital currency to pay foreign companies in other countries.
By the end of 2022, over 50% of all payments made in China will be made in digital form. By the end of 2023, 90% of all payments made in China are expected to be made digitally. Currently, over 20 million enterprises are making payments with Chinese banks through mobile banking apps such as WeChat Pay and on WeChat wallet accounts with the help of digital Yuan.