how is china leading the rise of digital currencies in asia
Sun Rises in the Digital EastOnce upon a time, China was the leader among the world’s countries by the volume of crypto trading, having a considerable number of miners and crypto enthusiasts. Then one day, in the second half of 2017, the Chinese government prohibited all cryptocurrency trading in the country.
Seemingly, it was the end of crypto-talk in China, or at least until last year when the government suddenly showed interest in blockchain and finally announced plans to launch China’s own digital currency.
Government backed cryptocurrency
Cryptocurrencies in their core exist outside the traditional banking system, offering individual liberty and a way to avoid the grasp of government. And that’s not the way China does things.
The government needed a national cryptocurrency so that
cryptocurrencies could be brought back under state control. And to be sure
that the Chinese really mean business, People’s Bank of China (PBOC) has already
sought legal rights to more than 50 inventions related to the digital currency.
Digital Payments in China
Just two decades ago, China was basically a cash economy. Today, digital payments are so ubiquitous that the government had to remind vendors that it was illegal to accept only digital payments and ignore paper money.
The “culprits” for the dominance of digital payments in China are payments giants and biggest rivals WeChat Pay and Alipay, who now account for 90% of the $17 trillion mobile payments market.
An eMarketer study found that 49.6% of China's population used proximity mobile payment apps over the past six months, and predicted that percentage would climb to 60.5% by 2023. That’s a huge piece of cake everybody would like to taste.
The
Chinese digital currency will initially launch on a mobile wallet app, and let
users trade their yuan for the digital currency or make payments on the
platform. It might seem like by launching its own digital wallet, the People’s
Bank of China wants to compete against Tencent and Ant Financial (parent
companies of Alipay and Wechat Pay), but a recent Forbes report suggests that
the People’s Bank of China plans to partner with seven institutions - including
Tencent and Ant Financial - to roll out the digital yuan.
The Difference Between the Chinese Digital Currency And Existing Cryptocurrencies
The
main difference between a digital currency and a cryptocurrency is that a
cryptocurrency uses a decentralized system to ensure no single entity controls
the currency and underlying technology, whereas a digital currency can function
without decentralization using existing financial database technology.
Source: GIS reports online
The Chinese digital currency is in fact designed to tighten the government's grip on its financial system and will be distributed through traditional banks and the monetary system. Furthermore, the blockchain ledger will be controlled by the Chinese government and not distributed across the system, while the currency will operate like a normal currency.
According to The Motley Fool, The PBOC will initially launch the cryptocurrency on a mobile wallet app, with the central bank tracking the origins and destinations of every transaction.