• Andrew Hendren

The digital yuan

In January we saw Ukraine partner with Stellar Lumens (XLM) to make the coin their national cryptocurrency. Now, in an even bigger move, China has created their own cryptocurrency. The coin is currently being tested through an app which allows over one hundred thousand users to spend government handouts at a variety of places.

The Chinese government will continue to utilize physical money in addition to the digital yuan for the time being. Some analysts and bankers believe that Beijing plans to make all their money digital at some point in the future.

Unlike most cryptocurrencies, the digital yuan will be heavily monitored to make sure it doesn’t face large volatility. For this reason, it likely won’t be an investment piece. In addition, the use of the currency won’t add more money into circulation, it will simply replace equal amounts of physical currency.

Famous Chinese Banker Zhou Xiaochuan launched a study into a national cryptocurrency back in 2014. He was both intrigued and concerned about bitcoin from the start. Even when Bitcoin was first starting out, Chinese leadership believed that foreign cryptocurrency could weaken the power of the government.

There is concern among bankers from the States and Europe over this new currency. As of right now the US dollar is essential for most of the world’s economy. Through the use of sanctions, the dollar can essentially be used as a weapon. The digital yuan would allow cross border payments which the United States wouldn’t be able to track. It is possible that China simply digitizing their currency could weaken the power of US Sanctions and strengthen the yuan.

Over sixty countries are currently engaged in a study or development regarding a national cryptocurrency. When asked about potentially digitizing the dollar, Chairman Powell said research on the subject is a “very high-priority project.”