- The People’s Bank of China (PBoC) is leading among the central banks of major global economies when it comes to developing and experimenting with digital currencies.
- PBoC started “e-CNY” trials in four cities officially in August 2020 and has by now expanded the pilot projects into 23 cities in 15 provinces.
- The expansion is also accelerating: For the first 10 months (Aug 2020 to Jun 2021), 70mn transactions took place via E-CNY, amounting to RMB 34.5bn. In contrast, in just the last three months on record (Jun to Aug 2022), the digital yuan trials have already recorded 36mn transactions and RMB 17bn in transaction amount, indicating a significant speeding up
- Simultaneously the scope of application is also expanding, moving beyond shopping and restaurant payments to now also include experiments with tax refunds and public services.
- The current dynamic shows clearly that the PBoC is determined to push for a centralized digital currency, to gain control over the mainstream payment method of the future and enable stricter central scrutiny of financial activities.
- However, whether the digital yuan can become an international currency given its current design remains doubtful: The centralized structure with the PBoC gaining access to personal information will be highly problematic in most other countries. That other central banks will adopt a similar design for their digital currency appears unlikely.
Sinolytics is a European consulting and analysis company specializing in China. It advises European companies on their strategic orientation and concrete business activities in the People’s Republic.