China decided to ban bitcoin and every other privately owned cryptocurrency within the country’s borders back in 2014. However, even though this was not physically possible back in the day, now, it is achieved by the country. Today, you cannot make transactions using bitcoin and other virtual currency within the borders of China, and also, any company dealing in bitcoin is imposed with high taxes and charges. It is a primary reason why all the countries operating within China’s borders and using bitcoin have shifted their preferences to other countries like Kazakhstan, where electricity is available at cheaper rates. Apart from this, many other things have happened behind the Bank of China, and today, it is time that we get to understand them properly. By using the Digital yuan, China believes it will be able to eliminate cash from the system, but that is not very practical in Chinese thinking.
Everyone must understand that even though the financial system will be available at the Internet-based level, it must exist at the physical level. Therefore, there are plenty of reasons why eliminating cash from the economy will be a problem. For example, in some areas within the country of China, there is poor and inadequate availability of Internet facilities. Therefore, if the cash is eliminated, there will be many problems for the people living in that area. Apart from this, there are various other reasons why eliminating money is only partially practical, and we will read those reasons further in the post.
One very crucial reason why the idea of China eliminating the cash is considered completely impractical is that it will generate a feeble reach. Today, anyone who does not get to use the financial system over the Internet can easily use the traditional finance system to make transactions. However, with the elimination of cash altogether, there will be a poor reach of the government to the people. The government will no longer be contributing to communicating with people, which is why the reach will diminish. Therefore, it is something that is considered to be a very negative aspect of the government, and that is why it is not at all recommended.
Difficulty in spending
Eliminating the cash and replacing it entirely with the Digital yuan will create a complex ecosystem for the country. Moreover, anyone willing to spend physical money will not be able to do so. Moreover, more and more people will be using the internet-based system, leading it to become very slow. Whenever a person would like to make a transaction with the help of the mobile system, there is going to be a connectivity issue or there is going to be some other issues. Therefore, eliminating the cash and replacing it with the Digital yuan is not a very good idea to be implemented today.
No physical wealth
Physical wealth is one of the most crucial parts of the economy of China and every other nation in the world. If physical money is eliminated from the system, it will create a chaotic environment. Anyone willing to preserve the well will not be able to do so because it will only be done over the Internet. Moreover, the Internet needs to show proof that you are well then; therefore, presenting the wealth certificates can be difficult. Another very crucial reason which brings the idea to practicality it’s tricky is that it is going to eliminate any physical wealth in existence. It is going to be a problem for everyone.
Removal of personal touch
Today, due to the existence of financial systems and banks, it is straightforward for people to communicate with the banking authorities and make better decisions. However, when the system goes all over the Internet, personal touch will be lost. If the personal touch is removed from the finance system, there will be a lot of chaotic environments. There are going to be problems in communication, and also, it is going to lead to a lot of issues within the working system. There will not be clarity within the working, so replacing the cash with the Digital yuan is not an option.
Regardless of the safety and security protocol that artificial intelligence and software engineers developed, there is always a more significant risk over the Internet. If you think that the Internet is completely safe and secure, you are required to check the Internet properly. You’re always going to come across a few risk factors when dealing with digital tokens over the Internet, which is why you need to be very careful about it. If you replace the cash with digital tokens like Digital yuan, you will always be at risk, which is not at all acceptable. So, good decisions must be taken before eliminating the cash.