Current Affairs

China becomes first to Issue Digital Currency to its citizens

  • Posted By
    10Pointer
  • Categories
    Economy
  • Published
    10th Apr, 2021

Context

The Chinese government has started issuing blockchain-powered digital currency to its citizens chosen through lottery system.

About the digital Yuan

  • Issuing authority: It is a central bank digital currency which aims to replace some of the cash available in circulation.
  • Blockchain technology: It is a blockchain-powered digital currency issued by the central bank.
  • Legal: It will be a legal tender in China and will carry no interest paid on it.
  • Significance: This currency will be easy to use and protect form counterfeiting.
    • It has the tendency to reach the unaccounted ones.
  • Distribution: The currency could be distributed either through the lottery system by the local government or by the Central bank to commercial bank to circulate it further.
  • Controlled system: It will be have a controllable anonymity that would involve the disclosing of digital wallets to PBOC as the sole third party.
    • Users would have a “loose coupling of accounts”, means that their current bank account may not be too closely linked to their digital yuan account.

How it is different from the Bitcoin?

  • Bitcoin is a decentralized cryptocurrency which means that it is not controlled by any central authority like a central bank.
    • Whereas, the digital yuan will be issued by the People’s Bank Of China.
  • Bitcoin is also built on a technology known as blockchain but might have a different technical make up from the digital currency.
  • Bitcoin are completely anonymous. However, digital currency may have controlled anonymity.

Bitcoin

  • It is a cryptocurrency which was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto.
  • It is a decentralized digital currency means it is not controlled by a central bank or single administrator.
  • It can be sent from user to user on the peer-to-peer bitcoin network without a need for intermediaries.
  • Bitcoins are created through a process known as mining.
  • They can be exchanged for other currencies, products, and services, however their real-world value of the coins is extremely volatile.
  • Transactions for bitcoins are verified by network nodes through cryptography.
  •  Transactions are recorded in a public distributed ledger that is called a blockchain.

Other Countries with digital currency

  • China is the second country and the first major economy to officially launch a blockchain version of its own currency.
  • Bahamas Central Bank also launched the sand dollar.
  • Countries such as South Africa, India, Pakistan and Thailand are also planning the release of with official cryptocurrencies soon.

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