Cryptocurrencies have been so successful that governments are considering launching their own—we’ve seen the Fed flirt with the idea of an official dollar-backed cryptocurrency. However, China seems to have beat America to the punch and has been ramping up production of its own crypto. The country has been giving millions of dollars’ worth of the digital yuan to its citizens.
If this stage is successful, China could scale up the cryptocurrency project. Here’s what you need to know about the new national cryptocurrency, and whether you can buy some right now.
What's the digital yuan?
As the name suggests, the digital yuan is a cryptocurrency issued by China's central bank. Despite having made all cryptocurrency transactions and mining illegal, China has long considered creating a centralized token it fully controls. As far back as 2014, the Communist Party of China has been testing ideas for a national digital currency called DCEP (Digital Currency Electronic Payment).
Instead of printing banknotes and coins, the Chinese government would digitize some of its cash in circulation into a stablecoin token. According to the government, cash is expensive to store and easily counterfeited by criminals. By using a centralized cryptocurrency, China could make it impossible for counterfeiters to create fake digital cash.
For hardcore crypto fans, this flies in the face of the supposed libertarian ideals of Satoshi Nakamoto and blockchain. Regardless, even anti-crypto governments recognize the practicality of blockchain technology in some form or another.
How is digital yuan distributed?
Digital yuan is being distributed in a two-tier system across the nation's banking sector. The People’s Bank of China will distribute an initial amount of digital yuan to commercial banks across the country, and these banks would then be responsible for getting this currency to everyday users. One way they could do this is by giving people the option to convert paper cash into digital yuan.
China has already given out millions of dollars' worth in limited, real-world trials in certain cities, including Chengdu, Suzhou, and Shenzhen. This includes a $6.2 million “lottery” for Beijing residents, who could win small amounts of digital yuan just by participating.
Where to buy Chinese digital yuan
It’s almost impossible for non-Chinese residents to get digital yuan at the moment. Only when (or if) China decides to ramp up its digital yuan output in a full-scale launch will regular crypto investors be able to buy the state-sanctioned crypto.
Unfortunately, a lot of scams have popped up claiming that you get buy digital yuan using an app or website. If you see any advertisements or companies claiming to let you trade digital yuan, be careful. As of now, Jun. 2021, most of these companies aren't legitimate.
There's also not that much difference between holding digital yuan and the currency itself, like a forex trader. However, since the digital yuan is essentially a stablecoin, its price isn’t going to fluctuate. It’s similar to other stablecoins, such as Tether, which is pegged to the U.S. dollar and doesn’t move at all. Unless you think the yuan itself is going to skyrocket soon, holding its digital version isn't going to make you rich.