India is not the only country which is promoting and encouraging a cashless economy; our mighty neighbor China has already started testing their own digital currency, which is all set to replace paper currency in the coming years.
China’s new digital currency, termed as ‘ChinaCoin’ by few experts, works like Bitcoins, and works on cryptographic techniques.
Early this year, an announcement regarding this new form of digital currency was made by People’s Bank of China, which is China’s central and most powerful bank. As per the official announcement, this move has been triggered by the need to curb money laundering, stop outflow of currency to foreign locations and to stop tax evasion.
As per Chinese Govt., introduction of such digital currency will induce more transparency within business and commerce, and provide ease of usage to all citizens.
The parallel can be very well observed in India, wherein Govt. has just banned Rs 500, Rs 1000 currency notes to curb black money and to induce a cashless economy pan-India.
As per recent reports, Chinese Govt. is cautious in its approach regarding the digital currency, and testing has already started. In order to ensure a smooth transition to digital currency, Chinese Govt. will introduce their new digital currency in a phased manner, across few markets to start with.
Yao Qian, who is an official with the digital currency research center in People’s Bank of China said, “China will first introduce the currency in certain money markets and promote its use in a gradual and cautious way,”
Why Digital Currency?
As per reports, China will soon replace entire paper money circulation, and make the usage of digital currency as mandatory form of monetary transactions. Not only it will cost less to maintain such form of currency, it can unleash a new way of doing business as well.
More than $800 billion went out of China in 2015, which increased inflation, domestic prices and hurt the economy. China’s dependence on US Dollar will strategically come down once digital cash is formally introduced.
Another set of reports indicate that officials from Citigroup and Deloitte have been working with Chinese Govt. since 2014 in order to execute the digital currency project by 2019. As per January 2016 report, the team is expected to “set up clear strategic objectives for digital currencies issued by the central bank, and develop key technologies and applications aimed at an early launch of a digital currency issued by the central bank.”
Digital Currency Can Replace Traditional Currency?
China is not the first country to experiment with digital currency.
In February last year, Ecuador became the first country in the world to roll out its own digital cash. In December of 2014, Ecuador’s Sistema de Dinero Electrónico (electronic money system) started operating, which has been planned to completely replace their traditional currency model, which takes sucks in $3 million of expenses just to maintain the currency notes.
As of now, Govt. employees are not paid using the digital currency, but efforts are on to convince various business establishments and merchants to start using the new digital currency.
Sweden is another country which extensively uses digital currency, however, it is not state-sponsored, which is the case with Ecuador and China.
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