The People’s Bank of China (PBOC) is leading the development of the digital yuan, a central bank digital currency (CBDC) that seeks to replace some of the country’s cash.
Table of Contents
What is a Digital Yuan?
It’s essentially a technique for the central bank to digitalize existing banknotes and coins. In terms of cashless payments, the Chinese market is already highly advanced. The digital yuan could help speed up the process.
The use of currency is diminishing, according to Yan Xiao, project lead for digital trade at the World Economic Forum. A digital format will eventually supplant cash.
In real-world experiments in Shenzhen, Chengdu, and Suzhou, China has already handed away millions of dollars worth of digital currency. These include the local government holding a lottery to distribute a certain amount of yuan. To obtain the cash, users must usually download a different app. JD.com, one of China’s largest e-commerce companies, took part in the trial and allowed users to pay using the digital yuan.
When CBDC experts like James Wallis of RippleX discuss which countries lead the way in CBDC innovation, China is frequently treated as if it belongs in its category. Yet, none of the world’s more advanced economies can match China’s commitment to developing a CBDC.
Related read, Federal Reserve Releases the Long-Awaited CBDC Report
China’s Digital Yuan Wallet Now has 260 Million Individual Users
The central bank’s digital yuan wallet is one of the most popular apps in China right now, in terms of downloads: According to Zou Lan, head of financial markets at the People’s Bank of China (PBOC), 261 million individual users have set up e-CNY wallets so far, accounting for about one-fifth of the population, and 87.5 billion yuan ($13.78 billion) worth of transactions have been made using the digital fiat currency.
The digital yuan is not a form of cryptocurrency prohibited in China. The PBOC has labelled bitcoin and other cryptocurrencies as highly volatile, unstable, and lacking in the inherent value and has warned that they may be used to launder money.
China’s Rollout of the Digital Yuan Puts Pressure on the Fed to Keep Pace
China’s reserve bank digital currency development has gotten off to a fast start in the new year, placing additional pressure on the US government’s efforts to digitize its own money. “China is a global power, and the creation of the digital yuan is one of the drivers for central banks around the world to accelerate their CBDC investigations,” said Martha Bennett, a vice president and principal expert at Forrester in London.
Also, read Why does IMF want Countries Like El Salvador to Not Accept Bitcoin as Legal Tender?
According to Bennett, China’s relocations have a more significant impact than CBDC rollouts in smaller countries, often having regional characteristics that facilitate the transition to digital currency.
A Congressional vote would be required to establish a US CBDC, or “digital dollar.” The US is not competing with China to build a digital currency, according to Federal Reserve Chairman Jerome Powell, but is instead considering how a CBDC may alleviate monetary addition and improve the disbursement of federal payments. Sen. Sherrod Brown, D-Ohio, has sponsored a digital dollar bill that hasn’t moved in almost a year.
China’s Digital Yuan App is Available on Chinese Android and iOS
The People’s Bank of China, which has conducted multiple experiments for its digital yuan over the previous two years, aims to reach a broader reach by launching an e-CNY wallet app across the country.
Cities across China have even held lotteries, with 10 million digital yuan (approximately US$1.47 million) distributed in Shenzhen in October 2020, 20 million digital yuan (approximately US$3 million) distributed in Suzhou in December 2020, and 40.2 million digital yuan (approximately US$6.2 million) distributed in Chengdu in February 2021.
Also, read The Chinese Government Set Up Pilot Zones And Entities For Blockchain Projects
The digital money is distributed through a two-tier system that moves e-CNY from the PBOC to commercial banks. The currency will subsequently be distributed directly to customers via banks. According to Reuters, the app is in a research and development trial phase. It is only available to many customers through supported institutions that provide e-CNY services, such as local central banks.
However, the new e-CNY app is only available in ten Chinese cities, including Beijing, Shenzhen, Chengdu, and Shanghai, and is available on both the Android and Apple app stores.
China’s Digital Yuan Targets Olympic Win
The Games will be the first time since testing began that China’s emerging digital currency, known as the e-yuan or e-CNY, will be shown globally. The virtual currency can be used by athletes and their teams at Olympic sites like cafes and shops.
The e-CNY is a digital version of China’s official fiat currency, equivalent in value to the local yuan, and is issued by the People’s Bank of China.
Also, read Chinese Banks Says ‘All Winter Olympics Merchants Will Now Accept Digital Yuan’
According to the Atlantic Council, 90 countries are considering – or have already launched – their own CBDCs. On the other hand, China’s timid foray into space could be a show-stopper for sophisticated nations. The digital yuans are available through seven authorized commercial banks and two internet banks intended for frequent, small-scale purchases and transactions. The transactions are made directly from a user’s digital wallet to the recipient rather than through a bank.
According to eToro market researcher Josh Gilbert, the e-CNY digital wallet was the most downloaded app in China for five days after its introduction.
Related read, Nway Launches a Winter Olympics NFT-Based Game
