According to reports, China’s digital currency is taking shape with trial runs or pilot projects that are being centered around travel subsidies and Communist Party fees. The agency in charge of developing the digital yuan confirms that the pilot schemes have been approved in four cities. This development comes hot on the heels of Libra, a cryptocurrency backed by Facebook, that has since scaled back its ambitions to become a global currency.
A screenshot of the planned digital currency emerged recently, and it seems to be a test version developed by the Agricultural Bank Of China. The National Business Daily in China reported that the Xiangcheng district of Suzhou was expected to put the currency to use in May, by giving 50 percent of payments of travel subsidies to public sector workers through digital avenues. Another publication, the 21st Century Business Herald has also reported that some Communist Party members are paying their membership fees by using the digital currency as well. It seems that the Digital Currency Research Institute of the People’s Bank Of China has also confirmed that there are trial programs involving China’s state-owned banks, in terms of this digital currency too.
The current murmurings indicate that the pilot schemes for the digital currency would be held in four cities, Shenzhen, Suzhou, Xiongan and Chengdu. Apparently, the 2022 Winter Olympics venues could also be used to test the currency. While there is no official timetable for the launch, there is rampant speculation swirling around the launch date. Some are saying that it is imminent, and share prices of the companies have surged last week in Shanghai and Shenzhen. According to Citic Securities, China is expected to make the sovereign digital currency readily available to the public later this year. Estimates are the the total size of China’s digital currency ecosystem could reach $USD 140 billion in the coming years.
The only other global competitor out there is the Libra payment system, and they recently updated white paper outlines the significant work that they have done on the design of the Libra payment system since June 2019. They are now offering single-currency stable-coins in addition to the multi-currency coin. An enhancement of the safety of the Libra payment system with a robust compliance framework is also in the works.
The ecosystem is forgoing the future transition to a permission-less system while maintaining its key economic properties. It’s also building strong protections into the design of the Libra Reserve. With at least 1.7 billion adults globally who are currently unbanked, the potential to get everything done through a $40 smartphone is something unmissable for an enterprise like Libra. Interbank-fees, remittances fees, wire costs, overdraft charges and ATM deductions are all negative aspects that hurt the bottom line of these individuals, and that’s why a system like Libra could be a game-changer for the future.
Companies in this ecosystem believe that it is possible to combine the best aspects of blockchain-based technological innovation, via distributed governance, open access and security. Coupled with robust compliance and regulatory framework, the building of certain compliance requirements at the protocol level can revolutionize the ecosystem. Ultimately, the goal of systems like this is to serve as a foundation for financial services, including a new global payment system that meets the daily financial needs of billions of people.
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