What is the Digital Yuan?
It is no secret that China supports blockchain.
Evidence is in their efforts to develop the Blockchain Service Network (BSN). The megaproject is spearheaded by several China-based blockchain titans with the blessings from the government.
Xi Jinping, the Chinese Premier, in October 2019, advocated for blockchain, saying the country should take the opportunity to be a world's leader in blockchain and implementation of other emerging technologies.
Therefore, it is a surprise that the same has been extended to banking. The PBoC, the country's central bank, could become the first to roll out the digitized version of the Renminbi.
The Digital Yuan—or officially, the Digital Currency Electronic Payment (DCEP) -- is a Central Bank-backed currency (CBDC), set to replace some of the Renminbi in circulation.
Using the Digital Yuan, the PBoC will effectively implement an initiative to digitize legal tender—notes and coins.
This, in turn, will speed up the level of cashless payment, which is, after all, very advanced in China. The CBDC could also be a cheaper alternative for the central bank since minting and storing notes and coins is expensive.
Because the Digital Yuan is by the country's monetary policy implementer, it shall be legal tender. Holding the coin, as expected with any other fiat currency, attracts no interest.
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