Assessing the Implications of China's Digital Yuan | ETF Trends

China is rolling out a digital yuan, making the world’s second-largest economy the first major country to create its own digital currency.

That move could have implications for an array of assets, fintech and otherwise.

The digital yuan could disrupt the digital payments industry (which itself is a disruptive industry when compared with traditional payments processing). One can open a PBOC digital wallet with nothing but a cell phone number—you don’t even need a name. The Chinese government even plans to fund these wallets with extremely targeted stimulus payments. The immediate use case could be to supplant Alipay and WeChat Pay in the domestic Chinese market.

“China is the first country to develop a Digital Currency. We will see increased Volatility in the Crypto markets as different Countries develop their own Digital Currencies,” said Eva Ados, COO and Chief Investment Strategist for ERShares, in an interview with Bloomberg.

The Digital Yuan Beyond China

With the backing of the central bank of one of the top economies in the world, the digital version of the yuan could see global adoption. Digital payments were already on the rise amid social distancing measures, but this new digital currency could up the ante.

“With the extraordinary direct public offering of Coinbase, sporting a valuation representing a high multiple of revenues/future earnings and at its peak reaching a market cap equal to NYSE and NASDAQ combined, we are all waiting to see how this will all unfold in the coming months,” adds ERShares.

Some existing exchange traded funds tap into shifting financial services and economic transactions to technology infrastructure platforms, ultimately revolutionizing financial services by creating simplicity and accessibility while driving down costs.

“Ados expects increased significance to the economy, in case the digital yuan takes over global transactions. Climate cost associated with cryptocurrency -such as bitcoin mining- indicates unfixed callings on how far the asset class can go. New regulation interventions are dawning with the cryptocurrency’s skyrocketing carbon footprint,” according to ERShares.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.