China has been working on a digital version of the yuan since 2014, and there is talk that the central government hopes to launch a form of e-currency for the 2022 Beijing Winter Olympics. That's why a screenshot of an internal mobile application developed by the Agricultural Bank of China showing a digital banknote, attracted so much attention on social media recently. For now, the digital yuan is theoretical, but how would it affect daily life? How is it different from the current electronic wallets? And will we eventually go digital all the way and become completely cashless?

Qu Qiang, assistant director of the International Monetary Institute at Renmin University of China, explained that digital currency is a broad concept and can take many forms, but in essence it is using the digital form to make or receive payments.

Prof. Jeffrey Towson, the host of Jeff's Asia Tech Class, pointed out that using a central bank digital currency is a bit more efficient for consumers since it doesn't require the intermediate step to link their bank accounts with online payment systems such as Alipay and WeChat Pay, but it's more significant on the government side as it allows the government to have more visibility into real-time transactions and bypass the western banking system when making transactions outside of China.

Prof. Towson said a regular consumer transaction with a digital currency would be pretty similar to the online payment transaction with Alipay or WeChat Pay. However, Qu elaborated the differences between a central bank digital currency and current electronic payment options in more details.

"Now you use Alipay, first you have to open a bank account through a normal bank, a traditional bank, then the bank will give you an electronic bank wallet, and then you can upload to your Alipay or WeChat, then you pay it. So basically, you're still using the traditional banking system. But with the digital currency, you don't need it anymore, you just need to install an app and then you can put the digital currency into your wallet. There's no paper banking notes to back you up in the bank account. So this is totally new," Qu explained.

Qu also said even though digital currency is the trend, electronic payment and paper notes will be with us for a long time since the digital currency tryout will be parallel with the current system for a long time.

Qu's point of view was echoed by Maria Demertzis, deputy director at Bruegel, a Brussels-based economic think tank. Demertzis pointed out although a number of European countries are increasingly more cashless, they realize they can't go totally digital and cashless. 

"There are good arguments that pertain to the fact that older people are not very digital savvy, are actually afraid of using digital currencies," said Demertzis. "But there are also other arguments that have a lot broader relevance, that is that cash has also got a psychology value of confidence. If you were to have a panic attack in the financial system, cash is always good to have."

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