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CHINA’S DIGITAL YUAN: RUFFLING A LOT OF FEATHERS? By: Hitesh Jajoo (K J Somaiya Institute of Management)
China is in the process of launching the most revolutionary financial project in the world. The Chinese economy has already adopted cashless payment quite smoothly, and this would be a step to speed up even more it’s turning its physical points and banknotes digital, unlike most cryptocurrency‘s like bitcoins, which work outside the control of a countries central authority. The digital one will be the world's first digital currency that is state owned and issued by the central bank. It can be used anywhere as it would be a total substitute for cash the only difference being that it is on one smartphone.In the smartphone the digital one would be stored in a digital wallet. It will not require a data connection for transactions to take place. Digital one is based on a technology called NFC (Near Field Communication) which allows to carry offline payments unlike Alipay and WeChat. You can make payment even when you are on a flight or climbing a mountain or in a forest where the Internet is bleak. It also has zero transaction fees for the merchant, whereas Alipay and WeChat charge 0.6% of every transaction.
WHY IS IT BEING INTRODUCED? As cited by Fan Yifei, Deputy governor of People’s Bank of China, it saves the cost incurred on printing and straw and storing notes and coins. Cash and coins can also be counterfeited and can be used for illicit purposes, and the identity of the user remains anonymous.
