After years of research and development, the Chinese central bank has finally built its decentralized digital currency, the Digital Yuan. The Yuan Pay Team was chosen as the company in charge of issuing tokens and facilitating public trading. The firm’s principal purpose is to promote, distribute, and allow safe trade of the newly minted digital currency.
When a nation or a firm announces its sponsorship of a digital asset, the price skyrockets, leaving investors rich. Given the significant government backing, many people expect Digital Yuan to follow in its footsteps. Bitcoin has brought in a new era of millionaires, and it is now time for Digital Yuan to do the same.
Is it possible for the digital yuan coin to dethrone the US dollar as the world’s reserve currency?
Ray Dalio, a prominent financial analyst, thinks that the US dollar will lose its status as the world’s reserve currency. Making the Chinese yuan more widely recognized and utilized may speed up the process.
According to Cornell economics expert Eswar Prasad, the digital yuan will not detract from the US dollar’s position as the world’s main reserve currency since the US controls the global economic system, has deep and liquid capital markets, and a still-viable institutional framework.
Will The Digital Yuan One Day Replace Cryptocurrency
Chinese regulators banned initial coin offerings (ICOs) in 2017 and warned that exchanges would be targeted. Because it was not issued via a legal system, and there was a danger of financial instability and capital flight, these procedures were taken. Mining, on the other hand, is legal, and China today ranks first in the world in terms of Bitcoin hashing power (the amount of processing power that devices use to build a blockchain), with Chinese yuan transactions accounting for 93 percent of all Bitcoin transactions prior to the 2016 ban.
The digital yuan coin will be constructed on the same blockchain technology as cryptocurrencies, but it will be controlled, with transactions supervised by a third party. We predict that the digital yuan will become highly popular among the Chinese people for the following reasons:
Its stability is comparable to that of Chinese fiat money. The lack of stability is a significant barrier to bitcoin adoption.
It Is Issued By A Governmental Organization
Digital wallets are widely used by Chinese citizens:
- By 2020, four out of every five payments in China will be cashless.
- A UnionPay research found that 98 percent of respondents believe mobile payment is safe.
Although the introduction of a new currency has an effect on competition, we anticipate that the digital yuan’s adoption will have minimal impact on the Chinese cryptocurrency market. Because the bitcoin market is already illegal, mining, which is a commercial activity, might be classified as a manufacturing operation that does not result in capital flight.
Meanwhile, Chinese authorities have declared cryptocurrency transactions illegal until late September 2021, adding that they would “attempt to cut off financial support and electrical supply for mining.” The announcement of China’s new law caused a decline in cryptocurrency prices throughout the world, notably Bitcoin, which lost 5% of its value in less than 24 hours. Because the market is less competitive, such rules may boost the usage of the digital yuan.