- China became the first major economy to roll out the digital currency.
- The e-yuan will bypass the global financial system.
- Economists, however, warn that this could jeopardize the US dollar in the long run.
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The People’s Republic of China (PBOC) has unveiled its first digital currency driven by a blockchain, controlled by its central bank, The Wall Street Journal first reported. The project lasted for seven years from the beginning of work in 2014.
The e-yuan is a state-funded virtual currency designed to track all money movements. For example, the state will know all the details of what someone bought and where, FXStreet reported.
It is money that is not connected to the global financial system, where the US dollar has dominated since World War II. Its main goal is to gain more centralized control and replace some of the money and money in circulation, CNBC reported. It is also a faster and cheaper way to perform domestic and international transactions.
The lottery system has selected up to 750,000 people, allowing them to spend their digital yuan in both offline and online stores using the app, according to the magazine. Food and beverage giants, including Starbucks and McDonald’s, reportedly quickly embraced the new currency.
China is the second country and the first major economy to launch digital currency. According to Bloomberg, the first state was the Central Bank of the Bahamas.
The distribution of the digital yuan will include a two-tier system. It will be distributed to commercial banks which will then be responsible for bringing the currency into the hands of consumers, CNBC reports.
The PBOC also suggested that the two-tier structure could “prevent disintermediation in the financial sector,” as the central bank would not be in competition with commercial banks, according to CNBC.
Virtual currency is located in cyberspace. It is available on a card or on the screen of an individual’s mobile phone with a picture of Mao Zedong, which reflects paper money. Spending does not require an internet connection.
Support for the digital yuan is not unanimous because some think it could potentially jeopardize the future of the U.S. dollar, MarketWatch suggested.
John Lipsky, a former International Monetary Fund employee, told the Wall Street Journal: “Anything that threatens the dollar is a matter of national security. It threatens the dollar in the long run,” in a function she described the virtual yuan as a re-imagination of money that could shake a pillar American power. “
Does that mean the digital dollar is on the way?
So does Jerome Powell, president of the Federal Reserve, telling Congress to carefully consider its release. It is now a “priority project” for us, he said.