As interest in bitcoin has grown over the past few months, so has interest in China’s digital yuan.
The Digital Yuan Is Making Headway
Bitcoin has been booming over the past six months, with the world’s number one digital currency shooting up from $10,000 in early October to about $59,000 at press time. That is an increase of almost five times the original price. However, the interest in BTC is also stirring interest in other forms of crypto such as the digital yuan. China has effectively banned bitcoin and has sought to implement the digital yuan to replace some of the cash and alternative currencies floating throughout the country.
In a recent interview, Wang Xin – the research bureau director for the People’s Bank of China (PBOC) – explained to reporters:
On the one hand, this is related to more and more central banks in the world participating in the development of domestic digital currencies… On the other hand, this [interest] may also be related to the large increase in the price of bitcoin.
The digital yuan initially opened to mixed thoughts in the sense that as a centralized currency – in other words, a form of money issued by a bank – it goes against the very notions that made bitcoin and several other cryptocurrencies so popular. Bitcoin is a decentralized asset, meaning it is not controlled by a single entity. Those who own bitcoin are in charge. They get to decide how it is used, what it is spent on and who should have access to certain information.
The goal of bitcoin and other decentralized forms of currency was to give financial independence back to the people, but a centralized currency works against this, and the fact that it is digitized seems like a big slap in the face to many analysts.
To add insult to injury, it seems like many countries are becoming intrigued by the idea of issuing digital versions of their national currencies. Regions such as Japan, Sweden, Switzerland and the U.K. are all exploring the possibilities of issuing centralized digital currencies through their banks, which could threaten the status of bitcoin and other mainstream forms of crypto.
This Goes Against the Idea of Digital Currency
Another issue? Bitcoin is based on blockchain technology, whereas to this day, it has not been made clear what the digital yuan stems from. This raises serious questions regarding the privacy of users and whether the asset will be utilized to spy on their purchases.
As it stands, the digital yuan is still very much in a developmental stage, meaning it has not yet been released on a national basis. However, the asset has completed several successful pilot programs in which select users are given time to test the currency out and use it for various purchases. More of these pilots are currently being planned for the coming future.