Up to 50,000 Chinese citizens in the country’s Silicon Valley have woken up with money in their accounts after the government distributed more than $ 2 million worth of their new digital currency.
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Depending on what happens in the coming years, the digital yuan could even replace the US dollar, which replaced gold after the Bretton Woods Agreement of 1944, as a global reserve currency.
The government distributed 200 yuan (around A $ 41) to 50,000 residents in a lottery as part of the largest test to date of the new currency quartz.
You can add even more once you’ve spent that: the lottery gives you a link to download the not-yet-public digital wallet.
Senior researcher at Beijing University’s Digital Finance Research Center, Xu Yuan, believes history will look back on the introduction of the digital yuan as another defining feature of 2020 alongside the novel coronavirus. This is evident from a translated interview he gave in April.
He even went so far as to say that the introduction of the digital yuan will have a longer lasting impact than the virus.
“If you look back at the current epidemic 20 to 30 years from now, you may find that this is not a big deal. But after the digital currency lands, the commercial and financial forms of the entire human society will change tremendously, ”Xu said.
Local media reports that the new digital currency works similarly to existing digital wallets like Alipay and WeChat Pay (or like Apple Pay or Google Pay).
It is not yet clear whether Beijing will compete with or replace these privately owned platforms, which are already used by more than a billion people around the world, according to the think tank of the US Brookings Institute.
In contrast to these two platforms, the digital yuan is issued and controlled by the Chinese central bank and can be used without internet access.
With the support of the central bank, digital yuan users also don’t have to worry about the (unlikely) possibility that commercial banks Alibaba (Alipay) or Tencent (WeChat Pay) could go bankrupt.
However, there are concerns that it might become easier for the government to track their citizens’ spending, including being able to see how much they are spending and what they might be spending it on.
“In theory, after using the central bank’s digital currency, there is no transaction behavior that regulators cannot see, and the cash flow is completely traceable,” Xu said.
“This means that all currency and payment transactions are online in real time.”
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