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Digital Yuan - The Weapon of Choice ?

Digital currencies are the future and they will become the present sooner than people estimated. But in the private space, there are various uncertainties but in the government-run programs, acceptance is at a much more stable growth. To give an example. Since the launch of e-CNY ( Digital Yuan), there have been 260 million transactions using it with a total worth of 83 Bn yuan ( $12 Bn).


Compared to the scale of retail spending it is still very small but the growth rates are massive as it has been only available since May 2020. The positive of this is that individuals and non-financial companies can directly hold them without banks being involved.


This also helps central banks track the actual spending of the currency with higher efficiency and lower cost. Another positive is that it can be programmed with a certain trigger such as a recession in macroeconomic data might release a higher currency circulation at a lower cost.


Another use in the making that has risen due to sanctions on Russia, is the lower dependence on Dollar Reserve and SWIFT which is in today's financial core.


China seems to be speeding it up as tensions with Taiwan accelerate and some speculation of a full invasion. If executed the impact of any sanctions will be harder than Russia has because the dependency on the dollar is very high. Currently, it holds $3.1 Trillion as forex reserve and $968 Billion in US Treasury bonds.


According to some reports China plans to form a special economic zone where companies and individuals abroad can set up wallets and transactions with local firms and individuals. This would accelerate the usage of the Yuan without many roadblocks it has today in case there is an aggressive force against Taiwan.


Despite these positives, there are some negatives but in the case of digital currencies, the advantages are way more than paper currency.

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