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  • Former Bank of China president, Li Lihui, believes that the digital yuan will gradually replace cash if four conditions are met. 
  • He explained that unlike AliPay and WeChat Pay, the digital yuan is designed to be independent of any network or third-party bank

Li Lihui, former president of Bank of China, has said that the digital yuan will eventually be able to replace cash if it meets some conditions. The central bank digital yuan is presently in the test phase and has generated anticipation among Chinese internet users.

Lihui recently explained that unlike AliPay and WeChat Pay, the digital yuan is designed to be independent of any network or third-party bank. However, four conditions need to be met for the digital yuan to replace cash. 

Whether the digital Yuan can become the dominant form of currency and mainstream payment means, depends on whether it has greater efficiency, lower transaction costs, enough economic scale with commercial value, and people’s acceptance.

According to Lihui, if a currency uses digital technology, it can be categorized as a digital currency. He classifies the latter into three segments – legal digital currency (referring to central bank digital currencies), blockchain-based cryptocurrency and trusted institution digital currency.

Lihui further added that digital yuan (similar to Bitcoin) uses technology that permits anonymous transactions. However, certain limits will be placed on the frequency and the amount involved in these transactions.