The Chinese government will use digital Yuan in a subsidy scheme for public sector workers. The credit of this Asian country will support this digital asset.
The People’s Bank of China responded to the concerns of some media about the digital Yuan, a new type of digital asset. The idea was to report the progress and characteristics of this new national currency.
The financial institution conducted most of the development and testing of this currency with high levels of security and control. Now, the People’s Bank of China (PBoC) decided to answer some questions of the citizens, given the launch of this digital asset, which would be in May.
A representative of the People’s Bank of China recently talked about the features of the new asset that will serve to pay subsidies in some cities of China. The executive mentioned that they conducted pilot tests on the use of this new currency. These tests were successful in cities such as Shenzhen, Xiongan, Suzhou, Chengdu, and Beijing, the location of the next winter Olympic games.
Although the country will launch this digital currency very soon to make some payments, the representative of the People’s Bank of China assured that citizens should not confuse the new tests of use with an official and public launch of the digital Yuan. The executive highlighted that the test of use will not affect commercial activities outside the test site.
“The current closed test of the digital Yuan will not affect the commercial activity of listed institutions, nor will it affect the RMB issuance or the circulation system, the financial market and the social economy outside the test environment”, he said.
The Chinese bank wants to prevent the issuance of the digital Yuan from making changes and modifications in the commercial and financial statistics of the country.
For this reason, the People’s Bank of China explained that those banks that will use the digital currency will pay 100% in reserves. This is the plan to avoid economic changes and also control the sale of the asset.
Main Features of the Digital Yuan
The bank hopes to take advantage of one important characteristic of the digital currency. The user can employ this digital asset even if he has no network signal.
In this way, the representative of the People’s Bank of China commented that the technology of this new currency would allow the system to function as if the user has paper money.
“In the absence of a network, as long as two mobile phones equipped with a DC / EP digital wallet are touched, the transfer or payment function can be realized”, he commented.
The bank also indicated that this new digital currency will not have affiliation with bank accounts. Besides, the digital Yuan will not have any relationship with the traditional banking system. This suggests that the financial institution will create a new digital system alien to the use of other circulating fiat currencies.
This new digital asset is different from conventional cryptocurrencies. Other crypto assets generally do not depend on any institution to circulate. But China’s monetary reserves will support the digital Yuan and the main financial institution of the country will manage this asset. For that reason, this case is different.
According to the statements of some Chinese government spokesmen, the digital Yuan will be less volatile than bitcoin. This is something that would guarantee stability in asset prices and the commercialization of the digital Yuan.
As a first instance, the government will use the digital Yuan in a subsidy scheme that the Chinese government maintains for public sector workers. This would be the first proof for the digital Yuan. After that, the government could consider using digital currency in other daily operations.
By María Rodríguez