The cryptocurrency market and fiat money have always been on the different sides of the fence. However, in the next few years, the situation is likely to change drastically. Recently, the People's Bank of China has revealed that its sovereign digital currency is underway to slowly replace the physical legal tender. Experts believe that Chinese digital yuan will be able to compete with the world's leading currencies.
They also note that this new virtual will pose a threat not only to bitcoin but also to the hegemony of the US dollar. The digital yuan is a synthesis of the traditional fiat currency (yuan) with cryptocurrency. The Chinese authorities tend to ensure the independence of the monetary turnover of funds from the banking system.
However, on the other hand, the government will gain full control of the financial flows. US market experts are widely discussing whether the digital yuan is a challenger to the dollar.
What is more, the digital yuan, developed by the Central Bank of China, differs from other cryptocurrencies because it combines features of both fiat and crypto money. It can be a virtual token or a familiar cash banknote. The digital yuan will be linked to the people’s smartphone number, with transactions taking place through an app and digital wallets. The Chinese government will back the value of the virtual yuan.
Analysts have already highly assessed the advantages of these unconventional means of payment. The digital yuan is expected to be easier to use than fiat money, allowing the Chinese government to take total control over the cash transactions.
Last but not least, the digital yuan will help circumvent US sanctions or conduct monetary transactions bypassing US financial watchdogs.
