As the world keeps up with the resilient growth of digital currencies, weighing the pros and the cons of adoption, China creates a digital currency that grants anything but anonymity, as transactions with the currency, dubbed the cyber yuan, is monitored by its central bank.
The goal of the Chinese Government is to create a digital currency that fast tracks payments both within the country and internationally.
As bitcoin began gaining international prominence, the People’s Bank of China (PBOC) began creating working on the cyber yuan.
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How Does the Cyber Yuan Function?
According to the Times of India, the functions of the digital yuan mirror those of already existing payment systems like Alipay and WeChat Pay.
Users would need to download a digital wallet where their money is stashed, and a QR code is generated and can be scanned at payment terminals.
This digital currency would serve to replace the traditional cash system, while banks in China would distribute it to users by depositing the equivalence of the amount in their reserves with the PBOC.
Banks will play a major role in the movement of the digital currency, as opposed to other digital currencies like bitcoin where the currency passes through blockchain for validation, eschewing conventional banks.
The Larger Picture
Anonymity is removed from transactions made using digital currency, as every flow of transaction would be traced by the government.
It’ll aid the tracking of funds, by policymakers, to check the flow of illegal funds, creating policies that target specific economic groups.
This plays into the reasoning of the Central Bank of Nigeria (CBN) in its defence over its circular that directed all financial institutions to block all accounts that were linked to cryptocurrency transactions.
The CBN had explained that the opacity of cryptocurrency transactions “have become well-suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion.”
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It went on to add that “many banks and investors who place a high value on reputation have been turned off from cryptocurrencies because of the damaging effects of the widespread use of cryptocurrencies for illegal activities.”
What This Means For Nigeria
The emergence of a central bank-controlled digital currency could appeal to the apex bank in Nigeria, as its argument against the use of digital currencies such as bitcoin was the obscure movement of money without proper regulation.
