According to several reports in Chinese media, The People’s Bank of China (PBOC) has plans to issue a digital version of the yuan based on blockchain and cryptocurrency technologies and will launch a “Digital Yuan” as early as 2020. China has a multi -year plan for fintech growth and the issuance is likely to become another quantum jump for China.
Financial analysts note that the digital yuan is expected to challenge the U.S. dollar as an international key currency and U.S. dollar-based international financial systems. Financial analysts note that the US-China Trade War started by US President Trump is speeding up China’s resolve to develop a financial system that is not dependent or tied to the U.S. dollar.
Chinese President Xi Jinping announced new policies for blockchain technology growth and a spokesman for the PBOC said that this would become the starting point of the digital yuan. The PBOC has previously said that it would become the world’s first digital currency-issuing central bank.
The PBOC will likely control the digital yuan with its own blockchain technology. It is in this context that the National People’s Congress passed a cryptography law and the central bank included blockchain-based trade finance into the scope of fintech certification after the announcement.
One result that the government hopes for is that the combination of the digital yuan and existing mobile financial services is expected to lead to a decrease in the size of the underground economy and will push more Chinese citizens to use digital finance for both business and consumer transactions.
One issue that multiple analysts have noted is that China’s digital finance goals and its desire to launch its digital yuan will challenge the hegemony of the U.S. dollar. One industry expert said, “China’s efforts to accelerate the introduction of the CBDC are to quickly catch up with the United States in terms of financial competitiveness. The internationalization of the yuan can be carried out if the digital yuan is used in international trade networks down the road.”