Former Bank of China President Says Digital Yuan Can Replace Cash

Former Bank of China President, Li Lihui, has revealed the launch of the digital yuan is imminent, and that the currency can replace cash if four key conditions are met. 

The central bank digital yuan is currently in the test phrase and is generating excitement among Chinese internet users. Searches on the impact of the digital yuan and cryptocurrency in general has skyrocketed in recent times.  

Lihui gave a live streaming talk on People’s News on May 5 and explained that unlike WeChat Pay and Alipay, the digital yuan is designed to be independent from any network or third party bank. However, he said for the digital yuan to replace cash or other current payment solutions, four key conditions needed to be met: 

“Whether the digital Yuan can become the dominant form of currency and mainstream payment means, depends on whether it has greater efficiency, lower transaction costs, enough economic scale with commercial value, and people’ acceptance.”

Different forms of digital currencies

Li believes if a currency uses digital technology, it can be called digital currency. He defines digital currency into three categories: legal digital currency (referring to Central Bank Digital Currencies or CBDCs), blockchain-based cryptocurrency, and trusted institution digital currency. 

Crypto currency, such as Bitcoin is designed to be anonymous but transparent. The digital yuan, according to Li, also allows for technology that permits anonymous transactions. However, he added that limits would be placed on the frequency and amounts involved in anonymous transactions. 

As Cointelegraph reported previously, the Bank of China has carried out pilot testing on the CBDC in different sites and it believes it will not cause inflation.