Cryptocurrency ban and development of digital Yuan

On Friday, 24.9. Another report came from China regarding the ban on cryptocurrencies in that country (again and again). This time, the new ban applies to any crypto transactions that are illegal. However, against these frequent bans on cryptocurrencies, China is preparing the ground for its own digital Yuan.

The Digital Yuan has a free path

This Asian country has banned any transactions involving crypto transactions. This probably added the last nail to the crypto coffin. A local journalist reported on these events on his Twitter.

Breaking: The Central Bank of China issued the latest and detailed “Notice on Preventing Cryptocurrency Trading”. https://t.co/wnCwmpFXYy

– Wu Blockchain (@WuBlockchain) September 24, 2021

The ban in these documents is elaborated in detail. In essence, China is preparing the ground for its digital Yuan, which could see the light of day soon. It will, of course, be fully centralized and monitored by the Chinese government, so there is absolutely no question of any decentralization or privacy.

Competition for the USD?

An expert from the Export-Import Bank of the Bank of China (Exim) says that e-CNY, China’s upcoming digital currency, can be used abroad for various payments and has strong international competitiveness. However, experts have mixed feelings about how much influence the digital yuan can have in questioning the dominance of the US dollar.

On the other hand, many experts have stated that the digital Yuan is not designed to replace the dollar as a reserve currency. Instead, e-CNY focuses on one goal, which is to facilitate trade with China. Basically, however, it is about how attractive the Chinese currency itself is. The biggest challenge that e-CNY will face is to change the view of those who do not consider the Chinese Yuan as a reliable sustainer of value.

Strategic importance

Liu Yihua, Deputy Director of Marketing Policy Consulting at Exim Bank and a researcher at the Taihe Institute, said e-CNY could also be used overseas. Liu specified that, from a technical point of view, there is no fundamental difference between domestic, cross-border or offshore e-CNY transactions. He added that if e-CNY is to be used outside China, permits from local central banks will be needed and foreigners could then set up e-CNY wallets at local banking financial institutions authorized by the People’s Bank of China (PBOC).

The biggest potential use of foreign e-CNY payments is likely to be for business-to-business transactions, said Stanley Chao, general manager of business consulting firm All In Consulting:

“Companies will reduce costs, minimize time and literally be able to make real-time transactions over the phone. Customers can also send e-CNY to a Chinese factory immediately, and the factory can deliver products literally in just a few hours of receiving the funds. ”

Currently, these simple transactions can often take a week, but thanks to e-CNY, it will be significantly faster. This will be especially true for small and medium-sized enterprises based in developing countries in Africa and Eastern Europe, which have outdated and expensive banking systems.

“These smaller companies that buy and sell to China have high bank fees associated with wire transfers, paperwork, currency fluctuations and exchange rates. Sometimes the waiting time for receiving and sending funds can be up to a week, which reduces the speed of business, “ he added.

Easy access to e-CNY wallets for foreign users outside China would also be a big plus. Matteo Giovannini, financial manager at the Industrial and Commercial Bank of China, one of the largest commercial banks in the country, said the ability to have direct access to digital Yuan by simply setting up an e-CNY wallet on a local server ensures a very low entry barrier while supporting rapid adoption. .

The Chinese CBDC will give users big and small access to the digital ecosystem for global trade, making it easier to trade with China as a buyer on Amazon or Alibaba, said Richard Turrini, a Shanghai-based fintech consultant.

The Digital Yuan undoubtedly has a number of advantages over traditional Fiat currencies. However, there is a disadvantage that simply cannot be overlooked or accepted – the complete loss of anonymity and privacy and the surrender of the state institution that operates the CBDC. However, it will be interesting to see how this is the world’s first national digital currency.

Yuan and Olympics

One of the leaders of the People’s Bank of China said that the digital Yuan is still used mainly for the domestic retail market. China is actively testing this digital currency. According to data obtained by Forkast, the country distributed at least 18 e-CNY benefits totaling more than $ 43 million in nine cities last week to support the adoption of the digital Yuan. Many expect that China’s e-CNY will be fully implemented and ready for the February Winter Olympics in Beijing. Fan Yifei, Deputy Governor of PBOC, said the construction of the infrastructure for the use of e-CNY during the Winter Olympics has entered its final phase.