In the last few years, digital currency garnered a lot of media attention due to the soaring prices of Bitcoin- most popular of the digital currencies. But so far, the domain of digital currency has largely been in the private hands, and the governments have tried to downplay its usefulness and in some countries even banned it, as it threatens the state monopoly of money printing. But, the Communist government of China is always a step ahead of their global peers when it comes to pro-activeness towards new technologies.
The Communist government launched the first official digital currency of the world amid the Coronavirus pandemic.
The digital Yuan has been put on trial in three major cities of China- Shenzhen, Suzhou and Chengdu- and Xiong’an New Area to measure the efficiency of newly launched service. These three cities have a combined population of more than 4 crores and therefore it gives a broad base for the trial of the digital currency.
“The state-backed digital currency would have a stable value, unlike the privately managed currencies like Bitcoin. Unlike decentralized cryptocurrencies, such as bitcoin, that allow users to transfer value with no central authority or third party involved, the government-backed digital currency is put under the centralized mechanism of the central bank and thus is as stable in value as its cash cousin,” reads an editorial in China Daily, the mouthpiece of the Communist party.
The Chinese government is so advanced in terms of adoption of new technologies that it started the development of digital currency using the blockchain technology almost 5 years ago in 2014 when it was in an early stage of development even among the private players.
The country sees it as an alternative of American dollars, which has been the dominant currency in the global markets since more than a century, accounting for more than three fourth of total international trade and 80 per cent of the global reserve currency.
“A sovereign digital currency provides a functional alternative to the dollar settlement system and blunts the impact of any sanctions or threats of exclusion both at a country and company level. It may also facilitate integration into globally traded currency markets with a reduced risk of politically inspired disruption,” said China daily.
However, in order to make sure that it does not go against the United States full-on, which is already intake no prisoner mode, the China Daily said that- “These two settlement systems – US dollar and China sovereign digital – may operate side by side or if need be, on a mutually exclusive basis.”
While the central banks around the world like RBI, European Central Bank, and US Federal Reserves are busy in fighting the pandemic and make sure that the economy does not take a nosedive drive, the People’s Bank of China is planning the take on a dollar through state-backed digital currency. There is no doubt that the country would have first mover’s advantage in the digital era, given the fact Coronavirus induced pandemic is going to only accelerate the process of digitalization for the government as well as the private entities.
This shows the preparedness of the government of the Communist government. When the world would get over the Coronavirus pandemic, China might be in the process of transition to digital currency. And it would have the capacity to expand its digital currency payment system for the other countries around the world, but only if these countries have any trust left in the Chinese system. Nonetheless, Chinese colonies like Pakistan are going to use the Chinese digital currency even if other countries refuse to go for it.
China has taken a big leap forward in order to end the hegemony of American dollars. Given dollar’s long tail, it would not be easy for China to pull out anything like this, but at least the dragon is not holding the efforts. And the Chinese government and its central government must be applauded for this.