According to the central bank, the digital yuan application, e-CNY, had 261 million unique users by the end of 2021, more than twice as many as it had in October, even before this month's release.

It is unknown when the e-CNY app will be released nationwide, but it will be trialed in several cities and at Winter Olympics venues. By the end of December, transactions totaling US$13.8 billion had taken place via the app as the central bank pushed the adoption of its digital currency.

The People’s Bank of China (PBOC) accelerated the trial in 2022 by making the e-CNY wallet available through the Apple and Android app stores in China, following a draw and application process for early adopters. The digital yuan is nothing like cryptocurrencies, which are banned in China.

Cryptocurrencies like bitcoin are considered highly volatile, speculative, and lacking intrinsic value by the PBOC. Hence, cryptocurrencies are seen in China as potential money laundering tools.

Researchers at the central bank have published a research paper regarding the digital yuan. The digital yuan aims to:

1) Diversify the ways in which the central bank provides cash to the public and meets the public's demand for digital cash.

2) Encourage fair competition, efficiency, and safety in retail payment services.

3) Investigate ways to improve cross-border payments by following the international initiative.

The only way to convert cash into e-CNY is through commercial banks authorized by the PBOC to handle the operation. With over 8 million merchants using it, people have been transacting in huge volumes and embracing the digital Yuan in such a short period of time. As the US government is reported to be planning a bill to provide billions in funding to boost US capabilities amid the US-China tech war, the Chinese government has published a major plan to boost its competitiveness in the digital economy before 2025.

Pavan A

CBW - External Analyst

INDIA