China is testing a new digital currency with a pilot program. It’s set to be the first digital currency used by a major economy. After years of development, the program began last month in four Chinese cities. Starting in May, some government workers will receive part of their paychecks in the digital currency. To use it, they need to install an app. The currency’s value is pegged to the Yuan. Unlike other cryptocurrencies, the digital yuan is issued and backed by the Chinese central bank. It’s not decentralized and won’t provide the same anonymity as other cryptocurrencies do.
It’s not an independent currency itself, it’s just the digital version of the Chinese Renminbi (the official currency of China). In fact, there is always a central authority in this digital Renminbi system, that’s the Chinese communist regime. According to a professor from the University of Pennsylvania’ Wharton school, the new digital currency aims to replace Bitcoin and other cryptocurrencies with a system controlled by government authorities. Tang says due to its centralized structure, It would give the authorities more control over the everyday lives of Chinese people. The government can directly control each person’s wallet, and decide how you can spend your own money. For example, let’s say the government paid you a salary of three thousand yuan. If needed, it can impose a restriction on your money, making it so you can only spend one thousand yuan on rice. He added the system could also be used to suppress dissidents, restrict their access to necessities, or in extreme cases, seize personal property.
Officials say the digital yuan will making paying easier and faster for the Chinese people. But Tang says the Chinese regime is testing how much control it can exert over individual financial activity. He says the regime also has another motive. The Chinese communist regime has a goal and a plan. Once this technology matures, the regime can use the system to replace the US dollar. It’s trying to compete for dominance with the U.S. in the global financial system. The former governor of China’s central bank said last year that the digital currency would eventually be integrated into China’s belt and road initiative. China has been pushing to make the yuan international. But the U.S. dollar still makes up about 60 percent of foreign exchange reserves worldwide. In contrast, the Chinese yuan only makes up about 2 percent.