Amid the chaos engulfing financial markets and global economies, China has introduced its digital Yuan, the first cryptocurrency of its kind backed by a central bank.
The new digital currency, which according to Chinese authorities, is just a digital version of the Yuan and doesn't replace it, has been tested in four Chinese provinces over the last few weeks.
Consumers at the Chinese cities of Shenzhen, Suzhou, Chengdu, and Xiong'an are now able to use the virtual wallet application provided by the Chinese government to make payments at several stores stated in a list issued by the People’s Bank of China, including the US-based chains Starbucks, McDonald’s and Subway.
The new currency has reportedly been in the making for more than a year and is being tested through a pilot program since mid-April. This month, government workers are expected to receive parts of their monthly paychecks using the new cryptocurrency and will be able to access it through a digital wallet designed especially for digital Yuan transactions.
However, the Chinese government stresses that the new digital Yuan is only meant to make money transactions as cashless as possible, insisting that it doesn't replace the Chinese currency, nor does it challenge digital wallets.
Cashless payments have been widely used in China during the last several years. According to the China Internet Network Information Center, more than half of the population has dealt with digital wallets in recent years, using applications like Alipay and WeChat Wallet.
Due to its easy and fast access, digital wallets have been growing in popularity around the world, including China.
Additionally, digital wallets are expected to see a worldwide spike in usage in the aftermath of the COVID-19 pandemic, as they serve as a safe payment option.
Yet, the official announcement of the Chinese digital Yuan has faced lots of questions and concerns, regarding the timing of its release and whether it will be a safe option for everyone.
Unlike Bitcoin, Chinese central bankers will be able to monitor all digital yuan transactions. They call it "controllable anonymity," @ChorzempaMartin says, "which is one of the most Orwellian statements one could think about." https://t.co/BVvdt0Vlvi— Peterson Institute (@PIIE) January 15, 2020
Experts have noted that China's record of surveillance suggests that the wallet application, developed and controlled by the Chinese government for transactions using the new cryptocurrency, will facilitate tracking citizens, as it allows monitoring all of their financial transactions, especially that it doesn't provide the same anonymity offered by other well-known cryptocurrencies.
Analysts questioning the motives behind the virtual Yuan also hint that the Chinese government accelerated its processes to launch the new currency at such a critical time, in order for it to compete with Facebook's 2020 Libra currency, which hasn't been launched yet.
Moreover, the first-of-a-kind digital Yuan has been perceived as a Chinese attempt to compete with the US dollar's dominance over international finances, after its traditional currency has failed to challenge it for decades.
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