The main details of the Chinese central bank’s digital currency known as digital Renminbi or often referred to as the digital Yuan have been released.
These details include how the currency will be issued and how the security system.
The renminbi is the official currency of the People’s Republic of China (PRC) while the Yuan is a unit of the Renminbi currency.
Even so many people are more common with the Yuan than the Renminbi as the Chinese currency.
According to a report from financial services company Huatai Securities, digital currencies will be fully centered.
“Unlike digital currencies under a decentralized system like Bitcoin, this digital currency adopts a centralized management system,” the report said.
How Chinese Digital Currency Works
This digital currency will be fully controlled by the Central Bank of China and issued through commercial banks that have previously been selected.
There are six parts to this digital currency system: issuance, circulation, management, withdrawal, investment and financing, and settlement between banks.
The central bank will act as the command center where digital currencies are made and transactions are approved.
Commercial banks will make requests on behalf of their customers to issue new currencies and make transactions.
The way this works is actually almost similar to how the central bank issues fiat money, the difference is that once this digital money is spent the government will be able to control whether transactions can be carried out.
This gives the government greater coverage than controlling banknotes. This system is expected to help reduce China’s ongoing shadow banking problem.
But this digital currency system may enable the government to control its citizens through a controversial social credit system.
Digital Renminbi is a currency that includes a security system.
Because he will use basic encryption to ensure that the transaction process will be similar to Bitcoin or other cryptocurrency and use cryptography to secure the transaction.
Digital currency transaction information will also not be transferred with plain text like banks in general but will be encrypted.
This digital currency is also designed to be resistant to attack.
It will also use authentication technology to ensure that currencies can only be used by people who have them.
With a centralized system, China’s digital currency will be able to be used to carry out offline transactions.
This means the Renminbi digital users can spend the money even if they don’t have an internet connection.
There will be three centers responsible for managing data involved with digital currencies.
The first center will manage the use of currencies, the second will take care of individual registrants who want to use digital currencies and the third will analyze the
Meanwhile, the central bank will be able to see all transactions and who did it, other businesses will not be able to see this data.
Even so, it is still possible for businesses to access transaction information even though the results will be similar to cryptocurrency and they will not always be able to match transactions with certain individuals.
The wallet that is used for the digital currency Renminbi will use authentication methods, such as biomass codes, fingerprints and passwords.
The details given about the Chinese digital currency are clear enough, but there is no definite time when the digital Renminbi will be officially launched.
Many predict this currency will be launched soon.
Will this digital Renminbi be a success and be a trigger for many countries to switch to digital currencies in the future?