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China's e-yuan More Cryptic Than Crypto

more cryptic than crypto

July 11, 2020 | 

JOHN K MWANIKI |  0 Comments| 



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Cryptocurrency is fast taking up the world's financial systems. With over 70% of Central banks looking into creating their digital currencies, China's People's Bank is already at advanced stages.

It is almost launching the e-yuan that seems to be a game-changer in both the fiat and crypto world. 

Here are some of the reasons why e-yuan is more cryptic that crypto;

The e-yuan is centralized.

One of the most significant selling points of the crypto is decentralization. The decentralization means there is no central power that controls access and usage. While it might have seemed the best option, it also comes with its concerns.

While most traders would talk of a booming decentralized crypto nature, reports indicate that it does not meet the targets in applications. For example, most traders prefer decentralized coins due to security.

However, several crypto wallets have been victims of hacking and other financial irregularities, rendering them quite unsafe. 

Otherwise, with the e-yuan centralized nature, the users don't have to worry about security and scalability issues. With the People's Bank of China responsible for all its infrastructure, it must provide all the necessary tools for safekeeping.

They have to look into the customer continually evolving needs to ensure success.

Unlike the current crypto dispensation where there is no one to hold accountable in case of failure, the e-yuan allows the banks to stay in charge. They are responsible for all the losses and gains. 

The centralization of the e-yuan is also instrumental in controlling volatility. The ever-changing prices of Bitcoin have been one of the biggest challenges when investing.

The users are never sure of their value as the prices can change at any time. Their value gets based on the free market variants. It is thus susceptible to most effects of changes in the market. 

Centralized systems, however, are more stable. Similar to the fiat currency, e-yuan is subject to control from the traditional banking system. The banks will put up control measures to ensure stability.

They can reduce or increase supply depending on the amount of circulation they want to achieve. Such actions help in balance for users and managing inflation.

Using the Coin to Curb Financial Crimes

The other major challenge that comes with crypto is the ease of use in financial crimes. With less or no regulation, crypto users are free to engage in any transactions anonymously.

Criminals can easily trade-in drug and human trafficking, fund terrorism, and other illegal fundings without recognition.

The security concerns have made it hard for countries to embrace crypto coins. Even though most governments are looking at ways to regulate the currencies, it might seem all futile as the coins are ever investing in more privacy.

Newer coins keep coming up with privacy being the main selling point.

That is different from the state-controlled e-yuan. The coin operates within an underlying distributed ledger technology. That is where data gets synchronized among several computers.

The central authority uses this data to monitor all the transactions involving e-yuan. 

While the ease of monitoring transactions seems like an invasion of privacy on all fronts, it comes with ease of controlling financial irregularities. The controlling body can easily monitor tax evasions, money laundering, and other illegalities. 

Even though crypto use offers security, it is only the centralized and monitored e-yuan that looks to provide that ultimate security. An example is the current banking system, where most people are prone to giving the same collateral for multiple loans.

Such can easily slip through as there is no way to detect the records. With the centralized data on e-yuan, only legit transactions get to completion. 

Globalization of Yuan

The e-yuan presents the best opportunity for China's currency to trade all over the world. Currently, the US dollar is the leading international mode of exchange.

According to the IMF, more than 64% of countries hold their exchange reserves in US dollar, while 40% of world debts got valued in dollars. 

The introduction of e-yuan looks to be the best way the Chinese currency will penetrate the world. Several investors and other digital money enthusiasts have voiced their support on the possibility of global use of China's digital currency.

Drawing its main features from Facebook's Libra, the coin looks to ease transactions due to the ease of access. The currency can easily integrate with the available payment methods like WeChat.

The more accessible the coin is, the easier the use and possibility of spreading. Safety is also top-notch and does not require a stable internet connection to use.

E-yuan is also big on cross boarder-transactions. It bypasses other traditional western payment methods like SWIFT.

With such functionalities, it is only a matter of time before the world will be transacting all over using digital Yuan.

Competing with Both USD and Crypto

One of the other edges that china's digital currency comes with is the possibility of more massive market traction. By operating like both crypto and fiat currency, the coin looks to cover both worlds.

As a digital coin, e-yuan is a threat to Bitcoin. Even though Bitcoin is currently the most traded crypto globally, it comes with several challenges that e-yuan seeks to alleviate.

Given the better security and stability that comes with e-yuan, there is a possibility of most Forex traders preferring it.

E-yuan is also a direct competitor to the US dollar. So far, it seems the best shot towards reducing the US dollar global dominance. However, there are still concerns about China's rollout plan.

There is the possibility of clubbing foreign trade to avoid taking too many resources outside the country. The other option will be to create a specific model for international trade and another version for domestic.

Bottom Line

Even though still on the pipeline, the prospects of a successful e-yuan is quite high. It promises top functionalities that beats the current crypto set-up. It comes with assured security and stability.

It is now up to the crypto world to invent more and become the formidable competitor of e-yuan. 

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