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Asia-Pacific, Crypto

China leads the race towards a government digital currency, but hurdles remain

By Dan Byrne for AMLi

THERE were mixed feelings about the latest test phase of China’s proposed ‘digital yuan,’ with some analysts praising its potential, and ordinary users claiming more would have to be done to convince consumers.

The ‘digital yuan’ is one of several Central Bank Digital Currencies (CBDCs) currently in development or under consideration by governments across the world.

It would hasten the abandonment of physical cash in China, while also providing a publicly regulated digital currency to match the popularity of privately-owned cryptocurrencies like Bitcoin.

China’s latest testing phase of the digital yuan involved the ‘gifting’ of approximately €25 at random to 50,000 Chinese consumers via an online wallet that they could then use for payments, Reuters reports.

While analysts claimed that the trial has “extended its [China’s] lead in the global race to develop a central bank digital currency,” the consumers who took part had a less than enthusiastic response.

It was reported that shoppers who used the app-based system preferred already-existing functionality such as third-party payment platform Alipay, which accounted for over half of all third-party payments in China in 2018.

Consumers said that the Chinese Central Banking authorities had more to do to convince them to switch to the ‘digital yuan’.

The trial’s end comes in the same month as lawmakers in Europe consider a ‘digital euro’, and what it could mean for the future of finance in the EU.

The concept was emphasised as desirable – or even inevitable – across many different political groups in the European Parliament in October, specifically as a way for public bodies to take back control of currencies as private ones like Bitcoin or Facebook’s Libra take prominence.

Cryptocurrencies have been regularly seen as a popular transaction channel for financial criminals, who seize upon the comparatively lax regulations and requirements compared to more traditional financial methods.

Meanwhile, given China’s apparent progress in developing a government-backed digital currency, fears have surfaced that it could lead to increased prominence of the yuan in global business – currently dominated by the US dollar and euro, Reuters reports. 

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