China’s Digital Yuan will not Replace Fiat Currencies, Claims Former Governor of China’s Central Bank
The former governor of China’s central bank claims that China has no plan to replace fiat currencies as it will facilitate Chinese consumers in cross-border payments.
As reported by the South China Morning Post, former governor of People’s Bank of China, Zhou Xiaochuan, China’s digital yuan is not created to take place of the world’s leading fiat currencies such as the US dollar and euro.
Comparison with Facebook’s Libra
Chinese Finance Association’s president also proposes that the digital yuan will revolutionize the cross-border payments as well as investment channels between the countries. He even compared DCEP (digital currency electronic payment) to Libra, the crypto project introduced by the social media giant Facebook.
“If you are willing to use it, the yuan can be used for trade and investment […] But we are not like Libra and we don’t have an ambition to replace existing currencies.”
Libra was rejected by the regulators as well as governments of various countries because it could threaten fiat currencies. But the Chinese yuan is not intended to replace the US dollar or the euro. He claimed that some central banks are afraid of the internationalization of the Chinese digital currency.
There are many advantages of the digital yuan over fiat because it could create a perfect channel for currency conversions in real-time processing and payments across the borders.
Chinese investors are already using online payment options such as WeChat Pay and Alipay or credit cards for cashless payments. The advent of central bank digital currency could infuse further transparency and real-time processing in the whole process.
The former official of China’s central bank has tried his best to clear the doubts of those who see digital yuan a potential threat to fiat currencies of the world. Financial experts were expressing their concerns that many countries are left behind in working over respective central bank digital currencies.
Recently, the vice finance minister of Japan for international affairs claimed that Chinese’s DCEP could pose potential threats.
Various PBOC-powered pilot projects are running successfully in various cities of the country and the results have been very progressive so far. After pilot projects, China will roll out the central bank digital currency across the country for public use.
The financial experts in the United States warned the US government of the potential threat from China and stressed to work over the digital dollar.