Why the PRC Digital Renminbi is Unlikely to Disrupt the Crypto Industry – CoinCentral
The People’s Republic of China (PRC) has unveiled a digital renminbi that would disrupt the cryptocurrency market if the regime decides to take over the cryptocurrency sector. Analysts believe this latest move is part of a long-term plan to undermine the cryptocurrency industry, as well as the global dominance of the US dollar.
China’s digital currency will be used to pay for transportation, online purchases and utilities.
However, one of the biggest debates about cryptocurrencies right now is the amount of control they give the government and whether they are being used to undermine the cryptocurrency market. Thus, the Chinese government will have absolute control over all funds circulating in the network. It also removes anonymity and allows you to track all user payments. On the other hand, it is an excellent tool for detecting fraudulent transactions.
The crypto-currency wars and the Tether situation
The Chinese government is working to close loopholes that allow citizens to use cryptocurrencies to circumvent strict money transfer rules and has already suspended cryptocurrency exchanges to achieve this goal.
However, it is estimated that some $50 billion in capital flows out of the East Asian country annually through cryptocurrencies. Tether’s notoriously popular with investors looking to move large amounts of money out of the country. It represents about 18% of the $50 billion. According to statistics from the Price Analysis 2020 – East Asia report.
Currently, most renminbi transactions for Tether take place in over-the-counter (OTC) markets. However, such machinations will be easier to foil in the future thanks to the increased scrutiny of transactions on the digital yuan network.
There are concerns that the Chinese government will try to ban the use of Tether and other wedges to stem the outflow of capital. Currently, the demand for USDT is so high that some Asian exchanges are demanding a 2% premium on the price.
Digital RMB is unlikely to affect decentralized currencies.
Some fear that China wants to wipe out other cryptocurrencies to strengthen its own currency, but such a scenario is unlikely due to the potential economic consequences, and the Chinese government is well aware of this.
It is also not possible to completely ban trading in decentralized cryptocurrencies like Tether, as they are based on a decentralized blockchain. This means that the Chinese government will not be able to directly control flows within the country. Today, most Chinese crypto traders access foreign exchanges through front-end domains and the use of VPNs.
Another factor is that the digital RMB is centralized and unlikely to be available on exchanges. So it will not be able to compete directly with other teams outside of China, which is more likely to negatively impact their demand.
Alternative reports suggest that the Chinese government is stepping up its fight against the US dollar with the renminbi crypto-currency. In recent years, the US government has turned the dominance of the US dollar into a weapon by imposing restrictions on its use in embargoed countries. By allowing its international partners to use its digital crypto-currency, China will be able to bypass currency surveillance by countries like the United States and circumvent the restrictions of the global money transfer network SWIFT.
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