How China Is Leading the World’s Digital Currency Revolution
While the coronavirus pandemic is widely considered to be a distinctly human crisis, it’s also hard to ignore its ongoing socioeconomic impact. Not only this, but the subsequent financial crash is also accelerating the pace of change and innovation in a number of different industries, as we inch towards a so-called “new normal.”
Take fintech, for example, where the Covid-19 outbreak has accelerated the move away from physical cash and pushed us closer towards a digital and cashless economy. China is undoubtedly blazing a trail for others to follow in this respect, with mobile payments here already accounting for four out of every five transactions.
But how is China leading the world’s cashless revolution, and what role do cryptocurrencies play in this trend?
Introducing China’s State Digital Currency
According to a recent report, China’s huge domestic financial market is underpinned by mass participation across digital channels, with an estimated 87% of customers in the region now using fintech services.
In 2019, the nation’s mobile payment market grew to achieve a cumulative value of $29 trillion, while China has also emerged as the largest global entity for online securities trading.
As part of this sustained governmental drive, China has conceived and created its own digital currency (which is colloquially referred to as the Digital Yuan). This is essentially a digital iteration of China’s fiat currency, and one that is similarly issued and controlled by the People’s Bank of China.
Last week, the government in Shenzhen carried out a lottery, with a view to giving away a combined total of 10 million yuan ($1.5 million) worth of the digital currency.
The lucky winners were invited to download a digital renminbi app to receive their share of the digital yuan, which can subsequently be spent at more than 3,000 merchants in a particular part of Shenzhen.
While nearly two million people applied to receive the prize, a total of 50,000 ultimately won. It was fitting that Shenzhen should be the home of this iconic lottery too, with this major city home to some of the country’s biggest tech giants such as Huawei and Tencent.
So, Will China Lead the World’s Digital Currency Revolution?
Of course, comparison with Bitcoin is inaccurate and ill-advised, not least because the latter is decentralised in its nature and free from any third-party control.
Conversely, the Digital Yuan is completely under the control of the state, so while China’s level of investment in crypto and blockchain technology cannot be disputed, their own currency arguably undermines one of the core benefits of tokens such as Bitcoin.
There’s a logical reason for the state to retain this level of control; however, as the government strives to create a digital payment infrastructure that’s implemented across the globe.
The key consideration here is that China wants to dominate the world’s new digital payment system, by ensuring that this is centred on the updated iteration of the Chinese Yuan rather than the US dollar.
Remember, the greenback has historically dominated the global forex trading market and international currency reserves, and there’s no doubt that China is looking to redress this perceived imbalance as it looks to become the world’s dominant economy.
According to most estimates, China’s economy will be considerably bigger than the US alternative by 2050, and it’s fair to surmise that the introduction of a cashless society will play a pivotal role in this transition.