The Contributing Elements of Digital Yuan!
Private giants like Alipay and WeChat Pay dominated the electronic payment market in China. However, China’s digital Yuan has decreased the utilization of these virtual payment platforms by an exceeding extent. Platforms offer commendable features like minimum trading fees, accurate trading calls, and 24*7 customer support. However, many people are still unaware of the reasons behind launching a centralized digital currency in such a populated country. If you are interested in Digital Yuan, you will have more info at this link.
The publically bank clearly announced that China had made this move to decline the utilization of bank notes or any physical form of fiat currency to process payments. Digital Yuan consists of several contributing elements; let’s have a look.
Why did China introduce the digital Yuan?
To understand the motivation behind China’s launching of the digital Yuan, we must look at the current trends. In recent years, China has been scrutinizing the usage of fiat currency in electronic payments as it can be used as a medium for money laundering, black money, and various other illegal activities.
The primary reason behind this was that there is no proper authorization system to track these suspicious activities using bank notes. In addition to this, the expenses incurred to print these bank notes are very much huge, and they account for more than 1/3rd of all costs incurred by banks.
For example, if you are a merchant, you might want to accept payments denominated in yuan and not want to hold large amounts of cash for payment collection. In this case, you can enroll on a digital currency exchange platform, deposit your Yuan from sales with the platform, and then use the deposited Yuan to buy digital currency such as Bitcoin or Ether.
China’s digital Yuan is not the replacement for the physical currency, but it can be used as a tool to process payments to merchants. So we are not talking about a complete replacement of hard cash with digital Yuan. Also, this new digital currency has been made legal by the bank of china, and in the future, it will be used by people only for china’s payment processing purposes. So here we can summarize that China has introduced this digital currency to strengthen its economy and make it more cashless.
How does digital Yuan work?
China’s digital Yuan is made of three parts
- Beijing’s Yuan Center
- Rural Area-integrated electronic payment system
- Digital currency exchanges
Let’s understand this one by one. 1) Beijing’s Yuan Center This is a virtual bank formed by the Chinese central bank, which has made it necessary for banks to give up handling fiat transactions and do only transactions in digital currency. 2) Rural Area: In general, around 40 million people without bank accounts yet have an internet connection; such people live in rural areas of China where banking facilities are less available.
Is the digital Yuan similar to bitcoin?
The Digital yuan is not similar to Bitcoin since the Chinese central bank has allowed the digital currency to be exchanged with every other form of fiat currency.
What will be the cost of a set amount of digital Yuan?
Market forces determine the price; if it drops in value, the rate changes accordingly. Now the value of the digital Yuan has not been determined yet, but this has been decided by China’s central bank and its policy regarding this new form of currency.
Digital currency exchanges
As of now, there are only two digital currency exchanges in china which are Huobi and Okcoin, but in the future more may be launched by the central bank. These platforms operate not as a bank but as an exchange marketplace where people can buy, sell and exchange digital Yuan. Beijing’s Yuan Center supervises these platforms; once you have bought your digital Yuan from these exchanges, you can use it to make payments to merchants.
The Chinese government has made it mandatory for all banks to have accounts at the Chinese central bank if they want to operate in China. It is also imperative for them to have a presence in the Chinese yuan center so that they can use new digital currency exchange platforms.
So this was a brief guide on how the digital Yuan works in China which will help you accept payments denominated in this virtual form of currency. It is essential to note that all these comments and views are subjected to change as time goes by.