Why Implement Digital Currency (What is Digital Currency, Why does China need to accelerate the implementation of digital currency)

08/13/2023 04:45 • Digital Disruptors • 49 views

Why implement digital currency? According to the report from Sina Finance, under the guidance of the People’s Bank of China, the People’s Bank has conducted research and pilot work on “China’s Digital Currency” in cooperation with various ministries, provincial and municipal financial management departments.

From a technical perspective, the technological foundation of digital RMB is advanced and reliable electronic payment methods. The distributed ledger system based on blockchain technology can greatly reduce transaction costs and improve capital utilization efficiency, among other benefits. Therefore, it can be said that with the official introduction of the legal digital currency system in China and the rapid development of global economic and social informatization, it will have a profound impact on the existing international trade pattern. (People’s Daily Online)

What is digital currency, why does China need to accelerate the implementation of digital currency?

Why does China need to accelerate the implementation of digital currency, and why will central bank-issued digital currency appear in the future?

From a national perspective, China is the world’s third-largest economy. Since 2014, China has gradually introduced the legal digital currency (DC/EP) and has been continuously promoting pilot projects to meet market demands. With the gradual implementation of the domestic and international dual-cycle policy and the research and formulation of CBDC by various governments, China has also started to establish a comprehensive national standard to promote the application and popularization of blockchain technology in China. Therefore, China should accelerate the development and application of central bank digital currency. In early 2020, Yi Gang, Governor of the People’s Bank of China, made important instructions on “how to prevent and resolve financial risks, improve the efficiency of the financial system, and maintain national security,” clearly stating that “the People’s Bank will continue to carry out relevant research and application work.” It can be seen that China should accelerate the exploration and development of digital RMB. What is digital currency?

Currently, cryptocurrencies such as Bitcoin belong to the category of privately owned or controlled wallets. They are virtual properties with the characteristics of legal compensation and compulsion, but they also have certain issues such as anonymity and illicit transfer. It is difficult to trace and trace their origins, making it difficult for people to directly use the digital tokens they hold for payment purposes. If we want digital currency to become an effective means of value storage, we can conduct transactions and circulation in an electronic form. It can also be used as a settlement tool or valuation unit, similar to cash, and real-time accounting operations can be conducted through smart contracts to reduce transaction friction costs. Another issue is that digital currency cannot be converted into real US dollars to avoid the impact of anti-money laundering regulations, so monitoring needs to be strengthened to improve the security level of funds.

For China, in order to deal with this situation, we must take a series of measures: first, actively seek support from legislative departments; second, increase efforts in cultivating technology talents. Currently, China has invested heavily in the field of mobile internet, mainly focusing on the development of mobile devices; third, vigorously support the realization of multi-terminal interconnection based on 5G networks and create a new mobile communication infrastructure service platform for different users.

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