China has been developing its own cryptocurrency led by the people’s Bank of China since 2018, and the release of the digital Yuan has created a lot of attention. President Xi Jinping indicated that the digital Yuan will be vital in advancing technological innovations as well as industrial transformation.
e-Yuan to help solve the debt problem in China
The country released the e-Yuan in last month, and since then, the digital currency has attracted significant interest from investors across the globe touting it to hit heights as those of bitcoin. Following the release, Chinese stocks saw a surge of foreign investments that reached more than $26.99 billion. However, it is not clear the extent to which the country will incorporate the e-Yuan in the financial system.
It is expected that the e-Yuan will offer a solution to China’s debt problem. Currently, recognized debt in China stands around $341 billion, which is due to the problem of people obtaining several loans using the same collateral. Blockchain Researcher J Rothers indicates that the smart contracts offered by the e-Yuan will enable the government to keep track of assets and liabilities. This will help in ensuring people don’t take several loans through the same collateral.
Authorized banks and brokers to sell e-Yuan
With the e-Yuan, the state will control currency circulation by allowing authorized banks and brokers to sell the crypto at first. There is no information on whether physical assets will back the digital assets. Recently the country acquired huge amounts of gold for backing the Yuan. It is expected that if the value of the digital Yuan drops, the Chinese government will back it with physical assets to even out prices in favor of investors.
Already some US franchises such as McDonald’s and Starbucks have reportedly started taking part in the trial of the e-Yuan after a successful pilot last month. SmartCard Marketing Systems Inc. has indicated that there is potential on the Chinese digital Yuan, and the launch will expand the company’s influence globally.
