There is a question: if the digital currency is already available, why is China going to launch a new digital currency (Chinese digital yuan)? The simple answer is that these are the third-party payment systems in China, like Alipay and WeChat, that provide the approach for the Chinese people to use digital currency.
But the disadvantage of this system is that you can replace this digital currency with cash. For example, suppose a Chinese citizen sent a yuan using Alipay to another person to exchange physical yuan.
But the government wants to replace all the physical paper cash and coins from the country and launch a digital system that the only government can control, manage or track. You can also read on (Official trading platform) for more information about Digital Yuan.
The history of Physical Cash
In ancient times, people always gave goods in exchange for goods because there was no currency, but the coins came into existence over time. At that time, people had a thing that they could exchange with goods and services in legal form.
The most considerable trouble with exchanging goods and services for services was measuring the right quality and quantity. For example, if you give rice in exchange for milk, it would be very complex for people to provide the right amount and challenge to measure the value of both things. But the coins made it effortless for people to estimate the right amount at the correct value, and all the people were happy.
After a few years, a new currency came into existence which was paper currency, and now the paper currency is the most convenient and usable method in every country. It is a preferable and easy payment method of all the payment methods.
It was a challenge for people to carry a lot of coins in a pocket and bag, and it is very complex to count a considerable number of coins that takes a lot of time. Suppose you will buy a new iPhone by taking coins in your pocket.
How would the shopkeeper feel if it took a few hours to count the cash? That is why paper currency came into existence, and the significant number on a single piece of paper reduces the weight of carrying huge notes or coins.
The beginning of the Digital Era
People were using the paper currency for all the transactions and coins in some cases, but in 2008, a new revolutionary currency came: cryptocurrency. When cryptocurrency came, people’s perspectives changed about money.
Millions of crypto users worldwide are trading different crypto coins such as bitcoin, ethereum, dogecoin, litecoin, etc. Unfortunately, many countries restricted crypto because of money laundering, tax evasion, and fraud, and China was also one of the countries that banned crypto transactions.
China in 2014
Bitcoin was popular in 2014, and many people started using it as a legal currency globally, and the number of users was going up rapidly. Since bitcoin or crypto coins are decentralized, the government cannot control them.
Still, China was thinking of launching its digital currency that people could use for their day-to-day transactions. However, the government will track every transaction of Chinese citizens so that they cannot track cryptocurrency.
The launching of a Digital currency institution
China launched an institution in 2016 to research the implementation of the digital yuan. The institution of the research team in China was established by the People’s Bank of China (PBOC) to know how the digital yuan would work and the effect on the country after launching the digital yuan or digital currency in China.
In 2017, the government approved the plan for establishing or developing the digital yuan now, which you can see in China.
The year 2020
In 2020, it was time to test the digital yuan by launching in a few cities, and the government tried it in the famous cities of China such as Shenzhen, Suzhou, Xiongan, Chengdu, etc.
The government of China gave many trials as a lottery to attract the Chinese citizens to the other digital payment applications such as Alipay and Yuan, and the offer was to win the 200 yuan that will appear in your bank after testing the digital yuan. As a result, many people started pushing for the Digital yuan.