China has introduced on a trial basis its own digital currency — eCNY or electronic Chinese Yuan. It is one attempt by Central Banks out of several in the last 12 months. The qualities of digital currencies are different. Digital currencies backed by government give a financial grip. It can have an expiry date. It is easier for governments to track transactions. Almost 60 countries have experimented with digital currency. Sweden has tried digital Krona and the Bahamas, the Sand Dollar. Though the US has moved slowly on this, it is likely to come out with state-backed digital currency. Perhaps, the Chinese digital currency will be extensively used at the 2022 Olympic. It could usher in a new financial system.

In short, digital currency from respective central banks is a defensive response to keep the fiat currency relevant. As cross-border movements of digital currency is faster, it would be easier for Yuan to compete with the dollar.

It will enable the government to monitor the flows of finance.