People’s Bank of China Explores Digital Yuan to Eliminate Cash Use

Since 2014, the People’s Bank of China (PBoC) has been exploring a virtual asset transactions system and now will be launching a pilot test of its national cryptocurrency in two major cities in China, Shenzhen and Suzhou. By doing so, People’s Bank of China is developing the next step for its crypto payment system.

According to Caijing Magazine, the Chinese central bank will be undertaking small-level crypto operations for the remainder of this year and then work towards developing the ideal model for a digital coin pegged to the yuan (rendering it a stablecoin) from next year. The bank stated that it had finished the pilot tests and will now establish a testing ground with the help of major companies and banks in the country.

Each bank will propose a payment method and the best one will be picked up to launch the crypto yuan. Previously, the crypto yuan had been promised to have been launched by the end of November, a deadline that it was unable to make. Regardless, China is intent on setting example that will lead to consequences for both the crypto sector and the entire international finance system.

China has been developing new ways to deal with US-based sanctions and increasing its influence beyond banking industry through creating a new and stronger path for digital assets in the country and then globally. Paul Vigna from the Wall Street Journal writes that through this they might even be in a position to assist North Korea financially.

The People’s Bank of China is utilizing technology used by Bitcoin(BTC)trade to run a series of thorough tests on its cryptocurrency which being completely funded by the country. Similarly, the president of the European Central Bank Christine Lagarde has explored the possibility of a euro-cryptocurrency developed by the bank, excluding the technical preliminary tests.

The Deputy governor of the People’s Bank of China, Fan Yifie, shared that the new virtual payment system will be able to replace cash use in transactions. Currently, China’s central bank already uses digital ledger technology (i.e. blockchain) only for large sums of money. However, the new digital payment system will be designated to citizens and their daily transactions.

The increasing rate of mobile-based transactions and the rise in fintech solutions such as WeChat and AliPay show that there is a demand for a larger variety of secured digital money. Although the People’s Bank of China has not given a deadline for the launch of the digital yuan, the series of tests will continue until the ideal model for transactions of virtual assets is finally selected.