There’s no denying the fact that, over the past year or so, an increasing number of countries are beginning to actively delve into the core principles underlying central bank digital currencies (CBDCs), an asset class that serves to potentially transform the global economic landscape. This is best highlighted by the fact that recently a growing list of countries such as the United Kingdom, Sweden, and Japan have all with their very own CBDC research and/or testing.
However, of all the CBDC projects that are there in existence today, none can even begin to compare with China’s e-CNY (digital yuan) offering, which at this point, has already undergone multiple rounds of beta-testing across high-population cosmopolitan regions including Beijing, Chengdu, and Hong Kong’s greater bay area. To really put things into perspective as to how evolved the project really is, a representative for the city of Beijing announced a fortnight ago that residents are now free to pay for their daily travel on one of the city’s major subway lines using the e-CNY.
A closer look at the e-CNY ecosystem and its progress
Launched a few years ago without much fanfare, the digital yuan was initially designed to help streamline the internal monetary processes of China’s various state-run commercial banks. However, soon after, the scope of the entire operation was expanded to include daily commercial transactions, as a result of which a number of pilots were initiated across Xiong’an New Area, Shenzhen, Suzhou, and Chengdu.
Most of the above-stated testing was done via a method referred to as an ‘airdrop’, where citizens of different Chinese metropolises were given a chance to register and potentially win one of 200,000 packets containing 200 digital yuan (approx. $31) each. The ‘winners’ were then provided with an app through which they were able to carry out real-time payments with the touch of a button.
On the subject of e-CNY’s staggering growth and ever-growing adoption, Warren Sample, Chief Strategy Officer for Vorto Gaming, believes that if China is able to harness the power of CBDCs, it stands to gain a lot from it, especially when it comes to spurring its economic growth in the near-to-mid term.
However, when asked about the dichotomy regarding the country’s decision to, on the one hand, promote its e-CNY offering and on the other not only ban its entire mining sector but also prohibit any financial institution from facilitating any crypto-centric transactions, Sample pointed out the following:
“China, along with other major economic engines around the world, has deployed dual strategies for ‘allowance from a far’ as well as ‘up-close regulative friction control’ when needed. When you create a totally new fuel for economic growth, governments seem to oscillate between letting it fly for the sake of direct positive output and the ripple effects to adjacent parts of the economy.”
China has set the bar when it comes to CBDC innovation
With each passing day, a seemingly increasing number of success stories relating to China’s CBDC project have continued to surface, with the most recent one China’s Xiong’an New Area govt. announcing that it has started paying its employees digitally. Not only that, an increasing number of companies operating across the aforementioned region too have begun utilizing the ‘Blockchain Fund Payment Platform’ in an effort to digitize the local economy which still relies heavily on paper currency.
Lastly, it also bears mentioning that to help drive the adoption of e-CNY, China has been able to onboard many of its top local retail firms such as Alibaba’s online grocery services including Ele.me, Tmall supermarket, Hema grocery stores, amongst others. As a result of this massive undertaking, it is estimated that the sovereign digital currency may finally be able to make its way into the pockets of more than one billion users over the next couple of years.
While some countries like S.E Asia’s Cambodia and the Bahamas have already gone ahead and issued their very own CBDCs, the adoption of these assets has been extremely sparse. However, as highlighted earlier, this very issue has been tackled head-on by the People’s Bank of China (PBoC) via its various e-CNY airdrops and mainstream retailer partnerships.
As a result, China is pretty much at the forefront of the ongoing CBDC revolution, with a growing number of countries watching the Eastern powerhouse’s every move eagerly, especially because the digital yuan experiment stands to potentially revamp many of today’s pre-existing banking structures.