Li Lihui, the former President of the People’s Bank of China, has said that the Chinse digital Yuan will eventually replace the physical cash in circulation in the country. He also explained that unlike AliPay and WeChat Pay, the digital yuan dubbed as DC/EP is designed to be independent of any third-party bank. Currently, the digital yuan is in the testing phase, and launch is expected to happen sometime this year.
Digital yuan might replace cash eventually.
According to the former President of the People’s Bank of China, Li Lihuii, if DC/EP meets some conditions, it will be able to replace cash in China. The former President of PBoC, Lihui, explained that unlike AliPay and WeChat Pay, which are widely used in the country, the digital yuan is designed to be independent of any third-party bank. However, four conditions need to be met for the Chinese digital yuan to replace cash. The four conditions he mentioned are higher efficiency, lower transaction costs, enough economic scale with commercial value, and acceptance of people.
Experts claim digital yuan could weaken the dollar’s global value.
Currently, the US dollar is the world’s reserve currency, as over 80% of international transactions are denominated in the US dollar. Some experts claim that the digital yuan could threaten the global value of the US dollar as China might use digital yuan to conduct international trades. The global dominance of the US dollar might not be the same once the Chinese digital yuan is launched. Lihui categorized currencies that use technology into three segments; legal digital currency (CBDC), blockchain-based cryptocurrency, and trusted institution digital currency.
China is on its way to becoming the first major country to issue a central bank-backed digital currency in the world. Several other central banks around the world are researching and studying CBDCs and contemplating to issue the same in coming time. However, the crypto community has questioned the intention of the Chinese government behind digital yuan or whether it might use the technology as a mass surveillance tool.