The Chinese government is fully aware that major things are currently happening in the country’s financial sphere.
First, cash usage is declining because of its inconvenience when making large payments.
Second, big tech companies are gaining bigger roles in cashless payments because of their digital wallets.
That’s why China sees the digital yuan as a solution to satisfy the growing demand for cashless payments and prevent big techs from gaining control of the digital payments sphere.
But aside from the problems mentioned above, there is one thing that makes China even more uncomfortable — stablecoins. In fact, the government finds it more concerning than bitcoin.
Stablecoins are digital money tied to fiat currency, and they have grown so fast that they have reached a market cap of $108 billion. But even with stabelcoins’ size, they are primarily used for digital trading and remittances, and not as a mainstream tool for payments.
The rise of e-CNY
With major changes taking shape in China’s financial sector, the government is certainly prepared to deal with these things through the introduction of the digital yuan, also called e-CNY.
Everyone in the financial sector expects that the digital yuan will become big in every way once it’s officially launched. Of course, everyone also expects that it would be powerful enough to unseat the U.S. dollar in global dominance.
But the People’s Bank of China made it clear that the digital yuan was not created to compete with any currencies.
Though it could be used for cross-border payments (which means it could be used globally), the central bank said that its core purpose is to be an efficient tool for domestic retail payments.
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