2022 kicked off with a major leap forward for the e-CNY – also known as the digital yuan – as the beta version of the digital yuan app was officially launched for iOS and Android on Chinese app stores.
Although the app has been available to some users in China for over a year under limited pilot programs, this is the first time the app is freely available for anyone to download and use in any of the selected pilot cities.
Users in 12 cities across China, including Shanghai, Beijing, and Shenzhen, can now pay for goods and services with the e-CNY. Sign-up is possible through seven traditional commercial banks and two online banks, all Chinese.
Shortly after the launch of the app, the Tencent-owned messaging app and payment platform WeChat announced that it would begin allowing users to select e-CNY as a payment option to pay for services. With over 1.2 billion users, around 750 million are active daily. This development could give significant exposure to the e-CNY, which some analysts say faces stiff competition from other online payment platforms – including WeChat itself.
The People’s Bank of China (PBOC), China’s central bank, first began trialling the e-CNY app in April 2020 when it launched internal testing in four cities. This pilot program has since gradually been expanded through invites and cash incentives to eventually reach 140 million registered users by October 2021, according to the PBOC.
In May 2021 it was also announced that the e-CNY would be integrated into Alibaba’s services ecosystem. This allows users of Alibaba’s food delivery app ele.me, grocery delivery app Hema Fresh, and e-commerce platforms Taobao and Tmall to pay for orders using the e-CNY – even though the digital currency is a direct competitor to Alibaba’s payment platform, Alipay.
261 million individual users (as opposed to enterprises), about one-fifth of the population, have set up e-CNY wallets so far, and 87.5 billion yuan ($13.78 billion) worth of transactions has been made using the digital fiat currency, Zou Lan, head of financial markets at the People’s Bank of China (PBOC), said at a press event on Tuesday.
The digital yuan app is currently only available in Chinese app stores and only in Chinese.
The digital yuan is by no means a manifestation of cryptocurrency, which is banned in China. The PBOC has deemed bitcoin and the likes highly volatile, speculative and lacking intrinsic value, and pointed out that cryptocurrencies could be an instrument of money-laundering.
The e-CNY aspires to achieve different results. Issued by the central bank, it serves as the statutory, digital version of China’s cash in circulation, or “M0”; indeed, the regulator intends to make e-yuan payments work even without the internet, using NFC technology.
According to a research paper published by the Working Group on e-CNY Research and Development at the central bank last year, the digital yuan aims to:
- diversify the forms of cash provided to the public by the central bank, satisfy the public’s demand for digital cash and support financial inclusion;
- support fair competition, efficiency and safety of retail payment services; and
- echo the international initiative and explore the improvement of cross-border payment.
A detailed FAQ about e-CNY is available in China Briefing linked as the source, below. It would be an interesting read for those who are keen on digital wallets that are connected directly to government-issued currency.
India had previously introduced a Unified Payment Interface (UPI) and BHIM App through which digital transactions were possible using unique UPI IDs just like email IDs. Account owners can have multiple UPI IDs connected to their bank accounts. The system followed open protocols so that banking apps and other financial instruments could also make use of it. The move brought in many digital transaction applications such as Google Pay, Paytm, BharatPe, Yono, etc.