The electronic Chinese yuan is now being checked in cities like Shenzhen, Shanghai and Beijing. No other major power has come as far along with a homegrown digital currency.
Recently, Annabelle Huang won a government lottery to attempt China’s newest economics experiment, a national digital currency.
After joining the lottery through the social media app WeChat, Ms Huang, 28, a business strategist in Shenzhen, got a digital envelope with 200 electronic Chinese yuan, or eCNY, valued at around $30. To spend it, she went to a convenience store close to her office and picked out some nuts and yoghurt. Then she pulled up a QR code for the digital currency from within her bank app, which the store scanned for payment. China has gone ahead with a courageous effort to remake the way that government-backed money works, rolling out its own digital currency with various qualities than cash or digital deposits. The country’s central bank, which started testing eCNY last year in four cities, recently broadened those trials to bigger cities like Beijing and Shanghai.
The endeavour is one of many by central banks globally to attempt new forms of digital money that can move faster and give even the most disadvantaged people access to online financial tools. Many countries have taken action as cryptocurrencies such as Bitcoin, which has recently risen in value, have become more popular.
Bitcoin was designed to be decentralized so that no company or government could regulate it. But, digital currencies formed by central banks allow governments more of a financial grip. These currencies can allow direct handouts of money that expire if not used within a specific date and can make it convenient for governments to monitor financial transactions to stamp out tax evasion and a crackdown on dissidents.
Over the last 12 months, above 60 nations have experimented with national digital currencies, up from only over 40 a year earlier, according to the Bank for International Settlements. The countries include Sweden, which is conducting real-world trials of a digital krona, and the Bahamas, which has made a digital currency, the Sand Dollar, accessible for all citizens.
Comparatively, the United States has moved slowly and conducted only basic research. At a New York Times event last week, Treasury Secretary Janet L. Yellen hinted that might change when she said an American digital currency was worth looking at as it could cause faster, safer and cheaper payments. Yet no major power is as far along as China. Its initial moves could signal where the rest of the world goes with digital currencies.
While the Chinese government has not disclosed if and when it will formally launch the eCNY nationwide, several officials have mentioned having it prepared for tourists visiting the 2022 Olympics in Beijing. The People’s Bank of China did not respond to a request for comment.
The development of a national digital currency started in 2014 when the People’s Bank of China established an internal group to work on one, shortly after Bitcoin got attention in the country. In 2016, the central bank formed a division called the Digital Currency Institute. Last year, it started trials of eCNY in the cities of Shenzhen, Suzhou, Xiongan and Chengdu, according to research from Sino Global Capital, a financial investment firm.
People invited to the trial through a lottery on WeChat or other apps could click on a link and get a balance of 200 electronic yuan, which was sometimes shown in their bank app over a picture of an old-fashioned Chinese banknote with Mao Zedong’s face. To spend the money, users can use an eCNY app to scan a retailer’s QR code or produce a QR code that the retailer can scan.
The design of eCNY takes only a few minor technical elements from Bitcoin and does not employ the so-called blockchain technology, a ledger like a system, which most cryptocurrencies depend on, according to officials from the People’s Bank of China.