China’s Digital Yuan Receives Lukewarm Response from Early Users
The People’s Bank of China (PBOC) is inching closer to becoming the first major central bank to launch a sovereign digital currency. The bank has rolled out several ambitious pilot programs in recent months in a bid to test how the digital currency, dubbed the digital Yuan, would work in real life.
Heading to the Digital Era
Last month, the PBOC launched the most extensive domestic trial to date in Shenzhen, a high-tech metropolis in the country.
The pilot trial allowed eligible participants to download the government’s e-wallet app on their phones and connect it to their bank account. They could then convert as much as 10K Yuan ($1,548) into the digital version, also called e-CNY, at a one-for-one rate.
Yet, a recent Bloomberg report shows that the much-hyped e-CNY is so far receiving a lackluster reception from early users. Most individuals interviewed by Bloomberg said they don’t intend to shift from the digital payment systems currently offered by established companies such as Ant group.
Some respondents cited privacy concerns as a major turnoff while using the e-CNY. They feared that the digital currency, which is controlled entirely by the PBOC, would enable authorities to trace each transaction.
There are even concerns that the digital Yuan could give the government real-time data on users’ finances and enable authorities to crack down on political dissidents.
According to Chinese regulators, the goal of the digital Yuan is to help increase financial inclusion and combat money laundering. e-CNY is also seen as a way to fend off potential threats from decentralized cryptocurrencies like bitcoin, which were banned in the country in 2017.
China To Prioritize Domestic Use of Digital Yuan
The hesitancy from early users involved in e-CNY trials highlights the massive task the PBOC has to foster adoption domestically.
In a recent interview, PBOC governor Li Bo said that the digital Yuan is meant for domestic use, allaying fears that China intends to topple the US dollar as the world’s main reserve currency.
“For the internationalization of the renminbi, we have said many times that it’s a natural process, and our goal is not to replace the U.S. dollar or other international currencies,” he reiterated:
Despite Li’s assuring remarks, some critics suspect China has high hopes for international use of the e-CNY as it strives to reduce its reliance on the US-led global financial system.
Although current efforts are geared toward domestic adoption, Chinese officials plan to trial the digital Yuan with international athletes and visitors at the Beijing Winter Olympics in 2022.
Ant Group Joins China’s Digital Currency Trials
In the past year, the PBOC has ramped up efforts to finalize trials for the digital Yuan. The central bank has so far distributed millions of dollars’ worth of the e-yuan via an app that is connected with six of China’s major state-owned banks.
The ongoing trials have also involved numerous brick-and-mortar stores that facilitate selected users to make purchases with e-CNY.
And now, Alibaba’s Ant Group has announced that it will become the first major privately run company to participate in trials and research around the e-Yuan.