China is closer than ever before in embarking on a digital currency revolution as the country's central bank successfully completes the trail run of its prototype cryptocurrency. Although there is not much information available about this trail run, but reports suggest that People's Bank of China (PBoC) is seriously mulling to introduce digital currencies into the market that will cover almost all types of transactions.

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If PBoC does go ahead with the plan, then it would be amongst the first major central bank in the world to issue digital currency in its domestic market. China's sellers would stand to benefit immensely from such a move, as it would cut down their transaction cost after eliminating the middle man.   

PBoC's push for digital revolution would also help in reining down on Bitcoin payment system. Analysts say that China's central bank does not want private players to have overwhelming control over the cryptocurrency market.

In past couple of years digital payment has become a reckoning force in Chinese economy, with millions of consumers preferring to make their payments through laptops and smart phones. The Alibaba funded Alipay is the most dominant digital payment service in China's fast growing digital payment market.

Although experts claim that digital currencies may somehow diminish the importance of physical currencies, but will not completely replace them. Nonetheless, they argue that the growing importance of digital currency is pushing the central bank to join the bandwagon.

Introducing digital currency will also help the PBoC in better circulation of banknotes and curbing money-laundering activities.

"Getting to know more precisely how much banks lend, where the money goes and the pace of credit creation is key to curbing money laundering and making monetary policy more effective," Duan Xinxing, an executive with local bitcoin company OKCoin Co, told Bloomberg, adding that digital currency will help the central bank in monitoring risks in financial system and track transactions across the economy.  

Meanwhile, China is not the only country in the region that wants to embark on a digital currency revolution. Its economic rival India is steadily pushing its economy to digital payment revolution, after it banned the Rs 500 and Rs 1000 notes last year.     

TagsDigital Currency, China Digital Currency, People's Bank of China (PBOC), china