How the experiments of a digital currency are proceeding in China

Applications of the digital yuan are increasing but the reception among the population is tepid, especially due to the risks of surveillance by the central government

China launches the public blockchain (Getty Images) From the state app to the bank private online: the digital yuan would be expanding the proofs of use to the electronic wallet of some My Bank customers, a wholly digital credit institution 30% owned by Ant Group. The bank has 35 million customers between small businesses and savers, with a growth of 68% in 2020 compared to 2019 and has confirmed the collaboration with the Chinese central institution, allowing users to link their account with the e-wallet already provided by the government in previous tests. Ant Group (33% owned by Alibaba) also owns Alipay, the most popular digital payment app in the country, with 55.6% of the market, followed with 38.8% by Tenpay (WeChat and Qq wallet). WeBank of Tencent, a competing group, was also listed as an option in the state wallet, but still unavailable, according to Bloomberg reports.

The digital yuan project was launched in 2014 by the then head of the People's Bank of the Republic of China, Zhou Xiaochuan, an advocate of a new international reserve currency alternative to the dollar. Some observers of Chinese affairs suspect that Xi Jinping has high hopes for an international use of the digital yuan as he tries to lessen the country's dependence on a US-led global financial system.



In fact, the head of the international department of the Central Bank of China, Zhu Jun, said that China has an important window ahead to promote the global use of the yuan, leveraging "rapid progress" in development of digital currency “to explore potential areas of internationalization”. On the contrary, Li Bo deputy governor of the same body said that the digital yuan is aimed at domestic use and is not intended to replace the dollar. In fact, there have already been contacts with the central banks of Thailand, the Arab Emirates and Hong Kong to evaluate their use in foreign trade, according to CNBC.

Internally, from October the cities of Shenzhen, Souzhu and Beijing were involved in test tests of the digital yuan, for a total of 110 million in vouchers and according to rumors the state would like to make it available to visitors and athletes for the 2022 Winter Olympics. Participants who joined the experiment downloaded the state e-wallet on their phone, transferring up to 10 thousand yuan (about 1280 euros) from their bank account, with a one-to-one exchange. Payment is made by reading a QR code, such as the popular Alipay and WeChat apps, which periodically offer discounts at retailers. However, they would no longer have to pay the 0.6% commission to fintechs for the service.

The novelty of the digital yuan would therefore not have impressed ordinary Chinese citizens, already accustomed to cashless payments. Indeed, according to Bloomberg reports, the reasons for perplexity are more widespread. The amount of data collected would allow the central bank to carry out real-time analysis in the second largest economy in the world, but it could also be used for security services, monitoring political dissidents or international businesses competing with Chinese state-owned companies.

A programmable version of the currency with expiration dates on stimuli and incentives could encourage spending in times of economic depression, but also allow regulators to shut down the wallets of those who come into conflict with Beijing. Concerns about privacy and difficulties in properly adhering to a fragmented tax system, over which the government may have direct control, are widespread among users. Designed to fend off potential threats such as bitcoin, Diem or money laundering risk and to increase "financial inclusion", the digital yuan is expected to cover 9% of Chinese digital transactions by 2025.


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China Cryptocurrencies Digital business Fintech Digital payments globalData.fldTopic = "China, Cryptocurrencies, Digital business, Fintech, Digital payments "

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