Martin Chorzempa, of the Peterson Institute for International Economics, says that China’s digital Yuan is far in advance of its global competitors, and that it has very little in common with cryptocurrencies such as Bitcoin, given their high volatility.
Chorzempa goes on to say that the digital Yuan is extremely low risk, and therefore far safer than cryptocurrencies.
“I would say the safety levels (of the digital yuan are) very high and the risk is low,” he said. “It’s designed to have the same value as any regular renminbi, so there should be no price fluctuations to worry about.”
However, the expert does remark that existing digital e-payments companies such as Alipay and WeChat will have to be surpassed first, before a digital Yuan can then move on to challenge the Dollar.
“It’s going to be essentially the central bank versus the big tech companies and that’s going to be quite interesting to watch.”
Chorzempa claims that the Chinese government is looking for a state-backed alternative to the incumbent domestic payments giants, which account for a massive 95% of all digital payments throughout China.
Alipay app and WeChat Pay have all but replaced physical cash in China, and have become by far the main form of payments for Chinese citizens.
China has been testing its Central Bank Digital Currency over the last few months, and trials have seen amounts of the currency being handed out to Chinese citizens to then go and spend at participating merchant venues.
According to Chorzempa, China is also worried that private tech such as Diem (formerly Libra, a project backed by Facebook) “might take over their currency” and go on to dominate in the country.
What China is seeking to do, is to have a single, state-controlled digital currency. It would then have the power to really micro manage its economy. However, opponents to this move believe that this would be too much power in the hands of too few.
On the other hand, Bitcoin is a decentralised system for all users around the world, giving total freedom to own and spend, with no government or organisation having any control over it.
The struggle for currency supremacy is unfolding before our eyes.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.