• Chinese New 100 Yuan Notes Wheeled Out

Chinese New 100 Yuan Notes Wheeled Out (Photo : Getty Images)

Even if Bitcoin has failed as a cryptocurrency, the People’s Bank of China is still determined to have its own digital currency. China’s central bank said it has been studying cryptocurrencies for the past two years.

In favoring digital currency, the bank said on its website that a cryptocurrency would help it cut expenses of putting in circulation paper bill versions of the yuan. At the same time, it would curb money laundering, improve convenience and transparency of transactions, lower rate of tax evasion and stop other forms of illegal activities related to the Chinese currency, reported CNN.

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The Bitcoin was created in 2009 by an anonymous person. It facilitated transactions minus an intermediary. By using computers, it bypassed banks. But due to the lack of need for those involved in Bitcoin transactions to identify themselves, critics said it opened a window for illegal transactions. However, because the trade was recorded digitally, those who were in favor of it said cryptocurrencies boost transparency.

BTCChina, one of the largest cryptocurrency exchanges in the world, is based in China. Beijing was against Bitcoin in 2013 and banned payment companies from transacting using the cryptocurrency. But the central bank eventually changed its policy so long as it was given a wide berth.

Hao Hong, Bank of Communications chief of China strategist, thinks the change in Beijing’s outlook has something to do with capital outflow pressure that China is going through. By being a state-backed digital currency, it would allow the yuan “to challenge the hegemony of the greenback,” although that would not be instant, Hao explained, reported The South China Morning Post.

If the central bank’s plan pushes through, it would join the ranks of Ecuador, which in 2015, recognized digital currency.