China’s journey with its central bank digital currency, the e-CNY, initiated in 2019, has witnessed remarkable strides in 2023. The adoption of this digital currency, initially sluggish, has picked up pace, with 26 cities serving as testing grounds and an impressive 5.6 million registered merchants nationwide as of the previous year.
In July, former People’s Bank of China (PBOC) governor Yi Gang revealed that total transactions had skyrocketed to 950 million, accumulating a staggering value of 1.8 trillion yuan (approximately US$249.9 billion) by the end of June. This meteoric rise was a remarkable leap from a mere 100 billion yuan (around US$13.9 billion) recorded just the previous August.
With the digital yuan now boasting 120 million wallets and its potential to bolster the international usage of the Chinese currency, mitigate the risks of Western sanctions, and challenge the dominance of the US dollar, its promotion is set to intensify in the years ahead.
Here are some recent developments highlighting the progress made in this endeavor:
1. Overseas Users Gain Wallet Access
Starting in September, foreigners residing in China can register for an e-CNY wallet using their international phone numbers. They can also fund their wallets using overseas Visa or Mastercard cards and transfer their wallet balances to offshore accounts. Additionally, these overseas users can employ their e-CNY wallets at offline stores displaying e-yuan acceptance signs and on popular Chinese platforms such as Meituan and Ctrip.
2. Digital Yuan in Civil Servants’ Payroll
The province of Jiangsu, situated in East China and known for manufacturing, is actively promoting the digital yuan. It has integrated the digital currency into the payment of salaries for civil servants and individuals working in public institutions in cities like Taicang, Xuzhou, and Changshu. Xuzhou unveiled plans in April to incorporate the digital yuan into the operations of Europe-bound freight trains associated with the Belt and Road Initiative, allowing payments for services and storage fees linked to transported goods. Suqian, in May, set a goal to make the e-yuan the primary settlement method for local public institutions by the end of 2025, with plans to adopt digital yuan wallets across all levels of government budget units.
3. Offline Payments Without Internet or Electricity
In January, the e-CNY app in China introduced a new feature that allows users to make payments even without a charged phone or an internet connection. Users can preset the number and value of payments and complete transactions by tapping their phones with the cashier’s device, even if their phones are out of battery or lack a signal. Currently, this feature is available on select Android phones. Starting in July, users can make payments without a phone network or power by using SIM cards as the payment medium.
4. Expanding International Reach Through mBridge
The PBOC’s digital currency institute joined forces with four other central banks in 2021 to form the mBridge platform. This platform includes the Central Bank of the United Arab Emirates, the Bank of Thailand, the BIS Innovation Hub Hong Kong Centre, and the Hong Kong Monetary Authority (HKMA). The mBridge aims to expedite the use of e-yuan for international settlements, reduce processing fees for cross-border fund transfers, and provide emerging markets with an affordable entry point into the global financial network. In June, the five partners discussed the development and implementation of a practical prototype to efficiently assess the e-yuan’s potential in new markets at minimal cost. HKMA’s Chief Executive Eddie Yue emphasized in a September speech in Shanghai that recent pilot trials have demonstrated the platform’s ability to accelerate cross-border payments, reduce costs, and enhance transparency. In September, Chinese tech giant Tencent joined the mBridge project as one of the pioneer organizations selected for the piloting phase.
5. Asean Settlements in e-CNY
During the China-Asean expo held in Nanning, Guangxi Zhuang autonomous region, in September, several banks established e-yuan experience zones to acquaint exhibitors with its functionality. Guangxi, as a border region, is viewed as a pivotal area for China to introduce digital yuan settlements in bilateral commerce with the 10-member Association of Southeast Asian Nations (Asean).
6. Hong Kong Joins the Digital Yuan Ecosystem
Bank of China Hong Kong (BOCHK) has enabled mainland customers to make purchases in e-yuan at over 200 retail locations in the city, starting in July during its “cross-border shopping festival,” which extends through October 31. In February, BOCHK invited Hong Kong residents to register for e-CNY red packets for use in digital yuan transactions while shopping in mainland China. In 2021, the HKMA and PBOC launched a pilot program for cross-border e-yuan usage in Hong Kong, and in June, the trial was expanded to include Hong Kong’s Faster Payment System.
As China’s digital yuan continues to evolve and expand its reach, its impact on both domestic and international financial landscapes is poised for significant growth.
