New Delhi: The new action plan for its digital currency will be implemented by China from January 1, and it will be the next significant step in the digital yuan development. The objective of the plan is to enhance management and operations and drive more people to adopt the central bank-issued currency as proposed by one of the senior officials in the People’s Bank of China (PBoC).
According to the words of Lu Lei, who is the Deputy Governor of the PBoC, the digital yuan is created to be a high-tech payment and circulation tool that is issued and circulated within the formal financial system. In an article published in Financial News, which is a publication of the central bank, he indicated that the next stage will introduce a new framework that encompasses measurement standards, management systems, working mechanisms, and the ecosystem in general, reported by Reuters.
Banks to offer interest on digital yuan balances
One of the main peculiarities of the action plan is the possibility to pay interest on the balance of digital yuan deposited by clients in the banks. This is taken to motivate people and organisations to adopt the digital currency with more vigour, as opposed to viewing it as a special payment method.
The attractive transaction of the digital yuan compared to the traditional cash or non-interest-bearing wallets will enable the authorities to increase the daily usage and integrate it more into the financial system.
Shanghai set to host International Operations Centre
The plan also suggests that an international digital yuan operations centre in Shanghai be developed. The eastern financial centre is likely to take a leading position in the administration of cross-border operations and promoting the digital currency of China to the world.
This is an indication that Beijing is planning to develop the digital yuan to extend beyond the national scope, but this approach will remain under strict control by the central bank.
Part of a global shift toward digital money
The push by China is seen in the world where central banks consider the introduction of digital forms of national currencies. The trend increased during the pandemic, with online payments becoming more popular and such cryptocurrencies as Bitcoin becoming more popular.
The PBoC has been developing the digital yuan since 2014 and has already tested it on several pilot programmes in the cities and regions. This does not mean that Chinese consumers do not use mobile payments heavily already, but the digital yuan provides the central bank with more direct control over the payment services that will not depend on big technology platforms as much.
China is on the way toward turning its digital currency into an element of a normal financial process with the new action plan.