Will digital currency RMB become a mainstream payment method?

Will digital currency RMB become a mainstream payment method?

China is seeking to make progress in developing its digital RMB.

In the early 2000s, the People's Bank of China (PBoC) began their own study on issuing a digital currency.

The People's Bank of China established a Digital Currency Research Institute in 2016 to specifically conduct research and development for its digital currency.

In June 2019, Libra, led by Facebook, announced a white paper that would create a simple global monetary and financial infrastructure. Since then, the People's Bank has been working to speed up the process of establishing the digital yuan.

This year, China launched a new legal digital currency test with a closed-loop. This included simulations involving payment solutions from both commercial and non-governmental institutions.

China's digital renminbi will be launching sometime next year and will be spread out in ten different piloting locations.

In March 2021, six major state-owned banks launched the new digital RMB wallet. In July, the Central Bank of China released a White Paper with the latest guidance for digital RMB research.

The White Paper defines digital RMB in the following way.

First off, digital money is a legal tender issued by the central bank.

One of the reasons digital RMB is a popular form of currency is because it's an accepted form of legal tender at the central bank. Digital RMB has the basic functions of value and medium of exchange, just like physical cash, which is also legal tender.

(b) The digital RMB is a form of legal tender.

(b) The management mechanism for digital RMB is the same as that for physical RMB, and the transfer of value is realized digitally.

The digital RMB is a liability of the central bank to the public, but backed by the credit of the state.

There are two types of digital RMB: virtual and physical.

According to their issuance authority, digital RMB is issued by central bank and managed by the designated operator. The commercial banks can provide digital RMB exchange services.

Third, the digital RMB is mainly positioned as a cash-based payment voucher (M0) and co-exists with the physical currency in the long term.

Both physical and digital RMB have the same legal status and are backed by the central bank.

The digital currency will be available to trade in parallel with the Chinese physical currency. The People's Bank of China will take joint responsibility for both types of money.

If people want physical RMB, the People's Bank of China will continue to print it.

Right now, much of the discussion around digital currency is about bitcoin. But it's important to note a crucial difference between bitcoins and the digital RMB - which is that the RMB is a retail-type, centralized bank digital currency mostly used for domestic retail payments.

The currency is available for use by the public, and it is used daily for transactions. This reduces transaction costs for the entire society.

Fifth, the digital currency and the designated payment gateway system architectureoperator's electronic account are universal.

Banks and non-bank payment institutions licensed by the People's Bank, who obey ongoing compliance and risk regulations, can enter the digital RMB payment system. They can provide services to people who use this currency.

Despite the hype about WeChat Pay and Alipay, as well as other third-party payment wallets and digital RMB, there are many differences between them. The cost and convenience might be higher for WeChat Pay or Alipay, but the security is lower.

WeChat Pay, founded by Tencent in 2011 and Alibaba’s Alipay both function as digital wallets.

Digital RMB is the tokenized version of fiat currency, which you’d store inside your Flyp.me wallet.


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