Digital yuan could be on the horizon in China to replace paper money, authorities say.
According to a report, the launch of the digital currency is likely to happen soon, and it could become prominent if four key components are met, per the former Bank of China President Li Lihui.
Lihui said those components are as follows: better efficiency, lower costs for transactions, enough economic scale with commercial value, and people accepting it as legitimate.
Li, in a digital chat this week, addressed an excited populace. He said the digital yuan would be independent of any existing bank or organization, unlike current digital forms such as WeChat Pay and Alipay.
He noted that any currency using digital technology could classify itself as a digital currency, and pointed to several categories, including blockchain-based cryptocurrency, legal digital currency from the Central Bank and trusted institutions’ digital currency.
The digital yuan would provide a framework to allow anonymous transactions in a manner familiar to cryptocurrency users, but Li said there would be limitations on the amount of those transactions and how often they could happen.
Currently, the digital yuan is in trial mode by the People’s Bank of China with 19 companies in the country, including American companies Starbucks, McDonald’s and Subway. The trial is being done south of Beijing in the Xiong’an New Area; the full launch is expected by 2021, though no date has yet been announced. There will be further tests done in Shenzhen and Chengdu, as well as before the 2022 Winter Olympics takes place in Beijing.
The idea of digital currency has been floated recently as a way to streamline international payments, as B2B transfers have been known for high fees. China’s banking leaders collaborated with five other countries earlier this year on mobilizing to move forward on the issue.
The coronavirus pandemic has made it potentially more palatable for people to utilize non-contact measures of paying, such as digital methods.