China has been running fast and forward with regards not only to blockchain but also digital currency. China’s official state-run news agency, Xinhua, quoted President Xi Jinping as saying that blockchain serves “an important role in the next round of technological innovation and industrial transformation.”
With the release of the e-yuan there is alot of speculation about what this will mean. Will the e-yuan be able to rival bitcoin, how will eyuan be sued in Chna’s financial system and if at all. Some believe the E-Yuan may provide a solution for Chinese long-standing bad debt problem. The country currently has 2.4 trillion yuan ($341 billion) of officially recognized bad debt due to the illegal yet popular practice of obtaining multiple loans pledging the same collateral.
“Using smart contracts provided by the e-Yuan currency, the government of China will be able to track assets and liabilities and to ensure that multiple loans are not taken over the same collateral”, says a senior blockchain researcher J. Rothers. The circulation of the currency will be controlled by the state and only authorized brokers and banks will be able to sell the cryptocurrency initially.
It is yet unclear whether the currency will be backed by any physical assets. China is known for recently purchasing large amounts of gold to back it’s fiat currency Yuan. It is likely that if the value if e-Yuan falls, the government would step in to provide physical asset backing in order to stabilize prices in investors’ favor.