Interest in the digital yuan may be driven in part by the bitcoin price spike, China’s central bank has said, despite the fact that cryptocurrency is banned in the world’s second-largest economy.
The digital yuan is an example of a central bank digital currency designed to partially replace cash. The People’s Bank of China, which has been working on this since 2014, sees it as a way to promote cashless transactions. This is essentially the digital version of traditional money.
Speaking to reporters, PBOC Research Director Wang Xin stated that the market interest in digital yuan is “very strong and everyone is watching closely“.
“On the one hand, this has to do with the fact that most of the world’s central banks are working to develop domestic digital currencies. On the other hand, this may also be related to the large increase in the price of bitcoin,” he added.
The price of bitcoin has reached a record high in recent months, while since the beginning of 2021 it has doubled. However, digital yuan will not be like bitcoin, which is not controlled by any central bank. Also, bitcoin is based on blockchain technology, while it is still unclear where the digital yuan will be based.
To date, PBOC has not set a timetable for the implementation of digital yuan in the country, but has implemented a number of pilot projects in Chinese cities. These often take the form of a lottery, where citizens in these cities can request the digital yuan and then spend it on retail companies participating in the program.