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China’s central bank digital currency

Topics Covered: Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology and issues relating to intellectual property rights.

China’s central bank digital currency

What to study?

For Prelims: What is the currency called? Where is it being introduced?

For Mains: Significance and concerns associated.

Context: China, which seeks to be the first major economy to launch a digital currency, is to trial a digital yuan in four urban areas – including payments of local government employees’ transportation subsidies.

e- RMB:

  1. The digital currency – known as the e-RMB – “will not be issued in large amounts” for public use in the short term, and the digital currency in circulation would “not lead to an inflation surge”.  
  2. Initially it will be tested in three major cities of Shenzhen, Suzhou and Chengdu.
  3. People’s Bank of China (PBOC), the country’s central bank, will be the sole issuer of the digital yuan, initially offering the digital money to commercial banks and other operators.
  4. Public would be able to convert money in their bank accounts to the digital version and make deposits via electronic wallets.

Significance and potential of the project:

China’s Digital Currency Electronic Payment (DCEP) project – as the country’s progress towards a digital yuan is known – began in 2014.

Central banks around the world are assessing the feasibility of launching their own digital currencies – so-called ‘central bank digital currencies’ (CBDCs).

The interest in CBDCs is being driven by factors including declining cash use and plans for privately owned ‘stablecoins’, such as Facebook’s proposed Libra.

Insta Links:

Prelims Link:

  1. What is a blockchain?
  2. What are Cryptocurrencies?
  3. Which countries have issued Cryptocurrencies?
  4. What is a Bitcoin?

Sources: Hindustan Times.