China Set To Introduce Digital Yuan Into All Payment Systems

China’s central bank official has stressed the importance of the Digital Yuan (e-CNY) being available for all retail payments to digitize its currency. Amid the heightened experiments and growing penetration, the e-CNY is still not widely used throughout China.

The People’s Bank of China (PBOC) has continuously increased the scope of its digital yuan trials since the start of its initial trials in late 2019. At least 26 places, encompassing 17 provincial cities and regions, are now included in the project.

The PBOC’s most recent move in this area was launching a pilot app in January 2022, as a way of giving users smooth transactions. Current observation shows that the e-CNY still needs to attain the intended degree of general adoption nationwide despite these ongoing experiments and digital activities.

During a recent conference, Mu Changchun, the Director-General of the Digital Currency Institute at the PBOC, discussed this topic and emphasized the need to make the e-CNY available for all retail payments. He stresses the importance of a smooth switchover from conventional payment methods to the digital yuan.

The integration of smart contracts into the e-CNY system was one of the tactics Mu explored. While explaining the workings of the latest payment system, Mu said that large-scale wholesale payments can be made more effectively by enabling complex processes like Payment Versus Payment (PVP) and Payment Delivery Versus Payment (PDVP).

Chinese Government Intensifies The Digitalization Of the Economy, Gives Reasons

Mu underlined that the objective is to foster peaceful cohabitation rather than supplant current electronic payment mechanisms or commercial bank deposits. Alongside these existing systems, the e-CNY gives consumers more options and flexibility when making financial transactions.

While commenting on the trend, Jane Lubale, an analyst with Inside Bitcoins, explained that the Chinese government is trying to keep its place as the world’s economic leader. She also disclosed that the government has been actively encouraging the adoption of digital technology across several industries, including finance.

Lubale also added that the move toward a digital yuan has repercussions beyond China’s boundaries. It can alter global reserve currency relationships and alter how payments are made between nations. During his official statement on this development, Mu stressed that there won’t be any need to change the conventional interbank settlement and payment system completely.

Mu also announced that there would be a need to introduce the CBDC payment function into the system. It was also gathered that the Chinese government launched a blockchain-powered data exchange in August: Hangzhou Data Exchange.

The new data exchange is expected to simplify the exchange of corporate data technology by taking advantage of the dispatched ledger technology. However, as of press time, no comprehensive details about the CBDC integration were released, either in Mu’s statement or subsequent dealings.

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