The Chinese government has begun a pilot program for an official digital version of its currency, with a limited rollout in the cities of Shenzhen, Suzhou, Chengdu, and Xiong’an—a new “smart” city, southwest of Beijing.
China’s moves have triggered concern about a new threat to U.S. financial dominance as it could eventually allow Iran and others to evade sanctions or move money without it being spotted by the U.S. government.
When the new denomination is up and running, individuals will be able to exchange it using digital wallets. They won’t need to have bank accounts. That could make it accessible to the 225 million people in China who have no access to the banking system. In rural areas, electronic distribution and exchange of money could help bolster development and reduce fraud by making cash easier to track.
At the same time, China will likely be wary of any circumvention of its capital controls, which aim to keep people from moving significant amounts of wealth out of the country. These controls were significantly tightened after a messy exchange-rate devaluation in 2015. Da Hongfei, founder of blockchain platform Neo, says the central bank could split part of the digital currency for use outside of China, much as it did with the offshore version of the yuan in currency trading.
This is a redacted Bloomberg article that can be read it full here.