![]() “The right to issue and control digital currencies will become a ‘new battlefield’ of competition between sovereign states,” read an article in China Finance, the magazine of the central bank, last September. Recent articles and speeches from officials at the People’s Bank of China, which is the country’s central bank, underscored the project’s ambitions and the desire to be first. While the Chinese government has not said if and when it will officially introduce the eCNY nationwide, several officials have mentioned having it ready for tourists visiting for the 2022 Winter Olympics in Beijing. Over the last 12 months, more than 60 countries have experimented with national digital currencies, up from just over 40 a year earlier, according to the Bank for International Settlements. These currencies can enable direct handouts of money that expire if not used by a particular date and can make it easier for governments to track financial transactions to stamp out tax evasion and crack down on dissidents. Many countries have taken action as cryptocurrencies such as Bitcoin, which has recently soared in value, have become more popular.īut while Bitcoin was designed to be decentralised so that no company or government can control it, digital currencies created by central banks give governments more of a financial grip. The effort is one of several by central banks around the world to try new forms of digital money. The country’s central bank, which began testing eCNY last year in four cities, recently expanded those trials to bigger cities such as Beijing and Shanghai, according to government presentations. “The journey of how you pay, it’s very similar” to that of other Chinese payments apps, Ms Huang said of the eCNY experience, though she added that it was not quite as smooth.Ĭhina has charged ahead with a bold effort to remake the way that government-backed money works, rolling out its own digital currency with different qualities than cash or digital deposits. Then she pulled up a QR code for the digital currency from inside her bank app, which the store scanned for payment. To spend it, she went to a convenience store near her office and picked out some nuts and yoghurt. The US Response to the Digital RMB Despite all the headwinds and uncertainties just outlined, over the long term one cannot rule out domestic and international success for the eCNY, for example if many other countries end up adopting CBDCs in the coming decades, and if those end up being more efficiently interoperable with the eCNY than the forms of USD that exist at that point.ANNABELLE Huang recently won a government lottery to try China’s latest economics experiment: a national digital currency.Īfter joining the lottery through the social media app WeChat, the 28-year-old Shenzhen-based business strategist received a digital envelope with 200 electronic Chinese yuan, or eCNY, worth around US$30. 86% of central banks in the most recent BIS survey are exploring CBDC, but the Bahamas is the only country that has launched one (Boar and Wehrli 2021).8 Central banks are increasingly open to the idea of launching a CBDC, but the share of central banks that told the BIS they were “likely” to launch a CBDC in the next six years barely increased in 2020 over 2019. ![]() If the eCNY is successful and catches on in China, should the United States be worried about it overtaking the US dollar in international commerce and reserves, eroding advantages that the United States gains from having the world’s dominant currency? Commentators in China and the United States often link the digital RMB to internationalization (Fan 2018), but I have yet to see a comprehensive, co. Officials will be careful to ensure that the eCNY does not disintermediate the banking sector and threaten the interests of largely state-owned banks, and banks have emerged as the key agents intermediating the system between the central bank and retail payments. There is debate in China as to whether the eCNY will be a liability of the central bank, and thus a CBDC at all.6 The PBOC is presenting its digital currency as having better privacy protections for users than the current systems run both by China UnionPay and the duopoly of Alipay and WeChat Pay, and there is some merit to its arguments.
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