The wallet industry is about to take a hit in China.
The manufacturing city of Shenzhen is slowly rolling out its version of digital currency – the “digital yuan” – to some of its residents.
In October, the city gave 10 million yuan worth of digital currency to 50,000 randomly selected residents who applied for it.
The government delivered the money by using a mobile “red envelope.” This red envelope is similar to the customary way of giving money in a red packet which became popular in WeChat’s e-wallet.
No, the digital yuan is not a form of cryptocurrency.
China’s digital money is issued and controlled by the central bank.
It’s still the same money the country issues – but digital.
The country hopes it will have better regulation of the currency that’s currently in circulation. And it’s not replacing third-party apps like WeChat Pay… in fact, it’s supplementing it.
The reason? Cash is dying out, and the central government sees this as an opportunity to get people excited about digital currency – while at the same time trying to solve some of their corruption problems.
Most people seem to be excited to participate in the process.
This distribution is the country’s first large and public test of the new digital currency.
China hopes more people will be willing to ditch physical money and fully transition to digital.
According to the government, almost 2 million people in Shenzhen signed up for this lottery-style process. If selected, they could spend the 200 yuan (about $30 USD) at over 3,000 places within the city. The only catch? They have to use the official digital yuan app, which is responsible for managing the digital currency transactions.
The government has a plan on how it wants to use this digital money.
Government documents show that the city has a five-year development plan that hopes to attract more investors, further develop the research for the digital yuan, collaborate internationally, and launch a “fintech innovation platform.”
With the central bank providing its logic and infrastructure, and private businesses innovating on the application level, it could help accelerate the spread of the digital yuan throughout the country – which has already shown promise.
What do you think – is this type of “digital currency” something Americans should consider? Or do you think that cash is king regardless of the tech advancements?
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