A Pilot or Full-Scale Implementation? China Pushes Digital Yuan

Still officially in a 'pilot phase', the digital yuan (renminbi) project is mostly concentrated on adoption efforts. The People’s Bank of China (PCoB) is actively promoting the country's Central Bank Digital Currency (CBDC) among both its citizens and foreigners.

Replicating a strategy of crypto airdrops, already tested during the Chinese New Year, PBoC is offering subsidies in digital renminbis and special gifts to people who use the app for daily payments, in this way onboarding merchants and consumers alike.

In vegetable markets across the country, consumers who scan the QR code in the app receive a “red envelope” that gifts them a percentage of the amount they spent shopping in Digital Yuans. In one of the first markets where the initiative took place, in the Ningbo city of Zhejiang province, people received 9 yuans for each 30 spent on their daily groceries.

Sports games are a well-understood promotional platform for foreign users, leading China to take advantage of the Asian Games (Asiad) multiple sports events to show off the e-CNY app and expand the use of its digital currency continent-wide.

Ahead of the event, which will take place in Hangzhou province from September 23 to October 8, PBoC is including a “ride code” feature in the e-CNY app that will allow all foreign visitors to seamlessly board the subway and take the train to various cities.

Besides incentives, PBoC also explores technologically ingenious solutions to push the adoption. The offline, no battery, SIM card-based hardware wallet solution seeks to address issues in the rural parts of the country.

e-CNY in circulation is still a drop in the ocean for the world’s second-largest economy, representing only 0.16% of its monetary supply. Nonetheless, since the pilot phase of e-CNY launched one year and a half ago, 950 million transactions have been made using the app, totaling 1.8 trillion yuan ($250 billion) in value, which showcases the results of the central bank’s soft tactics.

For comparison, the e-Naira, Nigeria's CBDC that has been in circulation since 2021 should have a transaction volume near $5 billion, (adjusted for population size and GDP difference). However, despite the strict cash restriction implemented nationwide, e-Naira volumes are still counted in tens of millions of dollars.

At a time when the U.S., European Union, and other countries are conducting technical experiments and pilot projects with their CBDCs, China is actively working on the adoption of theirs.

The Yuan is the fifth-most-traded currency in the world, and the fifth-most-actively used currency for global payments. There is still a long way to go for Chinese authorities to take over those ahead, especially the dollar, but with the digital yuan adoption accelerating, China’s central bank seems to have figured out a potential path.