Bank of China – Digital Yuan Will not Spur Inflation
The Bank of China’s confidential digital currency trial program has invoked enormous interest among residents in China. Of late, the bank has given out additional details on the working of digital yuan.
A representative of the central bank of China affirmed on China Central Television that the trial of the intended digital currency was conducted in Shenzhen, Chengdu, Suzhou, and Xiongan new area, and the future venue of the winter Olympics.
Nevertheless, the academic emphasized that these current trials do not mean that the digital yuan, also called as DC/EP, for “digital currency/electronic payment”, has been legally disbursed for public use. The bank’s representative further stated that:
“The current closed test of digital Yuan will not affect the commercial operation of listed institutions, nor will it affect the RMB issuance and circulation system, financial market and social economy outside the test environment.”
With the purpose of guaranteeing the non-sale of central bank digital currency beyond a certain limit, commercial organizations have been asked to maintain a reserve of 100% with the central bank.
In simple terms, at the time of disbursement, the People’s Bank of China will initially provide digital currency to banks and other related institutions. It will then be offered to public.
Of the two layer design of the digital yuan, the top layer has been completed. If weak network signals force the payment features of online banking and payment platforms, DC/EP’s dual offline technology will guarantee that the digital yuan will function in a way similar to paper yuan.
The bank said:
“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.”
As per the bank, the Chinese variant of cryptocurrency will not have any links with bank account.
Furthermore, traditional banking network will not have any control over the central bank digital currency.
Contrary to other cryptos, the digital yuan is rolled out by China’s central bank and is therefore pegged to the country’s credit. It is comparable to a digital version of the renminbi.
The bank states that, in comparison with Bitcoin, the latest digital currency will have better in-built stability.
It can be remembered that China’s central bank digital currency was trialed within the framework of a transport subsidies program involving domestic government and company employees.