The People’s Bank of China (PBoC) announced on January 3rd that they were testing a new financial infrastructure to enable digital payments and settlements. Furthermore, they recently released a digital currency named digital Yuan, backed by the value of the Yuan. The goal is to help the country’s financial system fulfill functions more efficiently using a more comprehensive range of technologies and to spur further development in financial technology, innovation, and inclusion – all while improving the efficiency of the central bank. If you want to trade in digital currencies, you can check this link.
The Chinese government’s decision to utilize cryptocurrencies and blockchain technology in its new infrastructure is game-changing in the global race toward switching traditional financial systems to cryptocurrencies and blockchain technology. In addition, the rapid development of other nations’ digital currencies has intensified the Chinese government’s interest in moving away from physical cash and toward electronic legal tender.
China’s Positive stance toward cryptocurrency
The PBoC did not entirely replace physical currency but supplemented it with digital versions. This move is considered a positive one for the cryptocurrency community, as it adds legitimacy to the concept and paves the way for other nations to adopt a similar system.
China has been very critical of virtual currencies in the past. As a result, the country banned initial coin offerings (ICOs) and shut down cryptocurrency exchanges, citing insufficient regulatory control around cryptocurrencies. However, this recent release of the digital Yuan shows that they see potential in digital currency. The promising news is given their status as one of the world’s largest economies and most prominent manufacturing and technology development players.
The Chinese government’s push toward digital payments over physical cash may also be influenced by a growing mistrust of China’s fiat currency, the Renminbi (RMB). In addition, while the country’s economy is growing, its outward investments have left it vulnerable to volatile exchange rates.
Adoption of blockchain in China:
Many believe that blockchain technology may revolutionize the banking system in China. For example, French and Chinese researchers recently unveiled a prototype of an interbank network that could use blockchain to reduce the costs of processing transactions and increase efficiency.
China implemented all the learnings from this experiment into their official digital currency, the digital Yuan. Blockchain is correspondingly the core technology of the digital Yuan; this clearly shows the adoption of blockchain in china. Moreover, full flash blockchain models like ethereum have gained much more traction in china despite the ban, as subsequent governments’ use of blockchain citizens have also realized the potential of this technology.
The transition toward digital currencies is already underway in China. For example, the WeChat bank, one of the world’s largest financial institutions, is currently accepting deposits and depositing them into its cryptocurrency trading platform, launched in 2015.
One significant advantage of digital currency over fiat currency is lower transaction fees, which can save consumers money even when using it for small transactions like topping up phone cards or paying utility bills. So What’s Behind China’s move to digital currency?
In light of the volatility of the RMB, it is no surprise that there is a shift towards digital currency. The government is seeking to invest in blockchain technology to boost the financial sector and make it more efficient. In addition, China’s Central Bank believes that digital currencies are a valuable tool to help stabilize and preserve the RMB when they believe their global influence has reached its peak. China believes that its digital currency will solve these problems by increasing the adoption of digital currencies worldwide, thus making it more stable over time.
When will china reverse its ban on cryptocurrencies?
As of now, the Chinese government has not made any changes to its ban on cryptocurrencies. As the digital currency market is still under intense scrutiny by the Chinese government, there is no clear timeline for when they will lift its prohibition. To lift the cryptocurrency ban in china, The Chinese government will have to see that cryptocurrencies are not only increasing in usage but are also doing so while complying with local regulations and regulations.
There is a high chance that China will soon reverse the ban on cryptocurrencies. However, if the digital currency market becomes more stable and more mainstream over time, this could potentially change China’s stance toward cryptos.