China's official app for digital yuan is seen on a mobile phone placed in front of an image of the Chinese flag, in this illustration picture taken October 16, 2020.
WHAT EFFECT WILL IT HAVE?
Widespread use of the digital yuan would give Chinese policy makers greater visibility into how money flows around China's economy.
This would help them track any illicit flows of funds, such as money laundering or terrorist financing, and it would also allow them to experiment by targeting monetary policy interventions on specific economic classes, regions or other groups.
In extreme economic circumstances, it would also allow them to have negative interest rates for cash.
China has a long-standing aim of internationalising its currency, and in time, the digital yuan may help with this initiative, making it easier to encourage users in other countries to use the yuan.
#China
#digital yuan
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