Introduction
The Chairman of the People’s Republic of China, Xi Jinping made a startling announcement in October 2019. He stated that China is considering investing in Blockchain technology and taking a key interest in how cryptocurrencies work.
This aroused global sentiment for a number of reasons-
- China had previously been one of the forerunners, when it came to Bitcoin mining, trading, selling, etc.
- It had since then banned any sale, trading or exchange in Bitcoins as well as on Blockchain technology.
- A secret Chinese cryptocurrency was speculated to be in the works since the year 2014. The rumour mills were getting louder by the day.
From a pro to a negative, to a reversal to a pro-crypto position, China’s new cryptocurrency is finally unravelling the future of the global financial systems.
What do we know about the New Crypto Yuan?
On 25 April 2020, China launched its own Blockchain- BSN or Blockchain Service Network. According to experts, this is the foundation on, which China’s new digital cryptocurrency will be based. Speculators are terming the new Crypto Yuan as DCEP- Digital Currency Electronic Payment.
Some of the big national undertakings in China, including the Agricultural Bank of China has already started experimenting with the new Crypto Yuan. Screenshots gathered from thyird party sources show that the interface is very similar to that of Alipay and other digital payment providers.
There is also talk of using the new Crypto Yuan on a trial basis to pay salaries and subsidies of workers in different government departments in China, including the government transportation department. One of the central reasons, which made China believe in pursuing crypto, was Facebook’s Libra.
According to people familiar with the matter, China looked at Facebook’s Libra as its base and imagined a global currency, which would have 2.3 billion users. It followed the same philosophy and wanted to create a truly digital crypto for the entire world.
Why China wants to establish a Global Digital Currency?
According to financial experts and analysts, a global digital currency by China can help in implementing a global use of the Yuan. While at the outset, this might not sound too important, it has several critical ramifications.
The world as we know it functions on a global level according to the dollar. Dollar is the globally accepted currency for transaction, exchange, buying and selling. However, if China can set up their own global cryptocurrency, it will make the world start using Yuan.
According to a Press Release by the People’s Bank of China (the nodal authority), the purpose behind the new digital currency is to protect China’s foreign financial assets and financial sovereignty in different parts of the world. This can also be seen as the result of a hostile standoff with the USA and Trump’s Trade Wars.
The new crypto proposed by China is not truly decentralized as is Bitcoin. This is going to help Chinese authorities maintain control over the system. It is also going to help them identify corruption and money laundering. On a comparative basis, the Chinese DCEP is closer to Facebook’ Libra than it is to Bitcoin.
Are Cryptocurrencies the Future of Global Finance?
Chinese interest in cryptocurrencies has spurted the price of Bitcoins in global markets. This trend is expected to continue as some of the bigger players are moving to Bitcoin to make tremendous long-term investments and seek 3x times profit levels.
As the world clamours to find a solution to the economic mess in the aftermath of Coronavirus, China it seems has found its way. It is pushing rapid advancements at a time when the world cannot do anything else apart from wait for the pandemic to tide over.
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