Beijing has touted the digital yuan as a futuristic currency that will make buying things more convenient and secure. Officials also say that it could help those who don’t have access to bank accounts and other traditional financial services.
While China is already nearly cashless and a lot of transactions happen digitally, they do so beyond the purview of the state on privately-owned apps and platforms.
An official digital yuan would change that, as it would give Beijing an unprecedented amount of information about how and where people are, and what they’re spending their money on — an approach that runs counter to the original intent of digital money in the first place. Bitcoin and other digital currencies rely on a decentralized blockchain system that prevents any one person or organization from having control.
“In essence, the digital yuan can help strengthen the state’s surveillance and control over the economy and society,” said Frank Xie, a professor in business at University of South Carolina Aiken. “It enhances the centralization of authority. That may be the fundamental reason why it has been strongly pushed and rushed by the state.”
There are still plenty of hurdles for China’s program to overcome before the new form of currency is entrenched in everyday life, though. And analysts are skeptical about whether the digital yuan can pick up the traction that Beijing hopes it can, much less pose a real threat to the US dollar. The ruling Chinese Communist Party’s desire to control its financial system remains the ultimate obstacle to creating any currency that could truly become global.
Keeping the digital economy in line
The push to develop a digital currency began in 2014, according to the People’s Bank of China. Authorities spent six years researching the project before launching pilot programs this year in Shenzhen, Suzhou, Chengdu and Xiong’an.
Like cryptocurrency, the digital yuan incorporates some elements of blockchain technology: Every transaction is recorded and traceable in a digital ledger. It would replace some of the cash that is already in circulation, according to Fan Yifei, deputy governor of the…
Go to the news source: China wants to weaponize its currency. A digital version could help