China today (January 4) released its digital yuan wallet on the Apple App Store and Google Android app stores in the country.
The e-CNY app is currently a beta version available to customers of financial institutions that support the project, including most major banks. However, the public release of the digital wallet is another clear sign that China intends to stick to its schedule and launch the central bank digital currency in time for large-scale public testing at the Beijing Winter Olympics from February 4 to February 20.
Although the digital currency is widely called the digital yuan, CBDC is officially the digital renminbi (RMB) or DC/EP, for digital currency/electronic payment systems.
Li Lihui, former president of the People’s Bank of China (PBoC) and head of the blockchain research working group at the National Internet Finance Association of China, said the plan aims to make mass use of digital renminbi payments during the Olympics. Report this summer in china daily, a newspaper owned by the Publicity Department of the Central Committee of the Communist Party of China.
A full-scale launch should follow later this year.
Why wallets are important
The launch of the wallet is significant for a number of reasons, the obvious reason being obviously because it means that China is on track to meet its launch date.
However, launching a digital wallet nationwide has its risks. And while China is unlikely to suffer from the vulnerabilities of the hacked and deeply hated Chivo wallet in El Salvador, it does mark a turning point for the eight-year digital yuan project: China must now persuade its people to use it.
Does e-CNY have legs?
In most countries, this may be a crucial point, but in a command economy like China, it could eventually force the use of the digital yuan.
See also: China tests digital yuan in wage payments
The recent blanket ban on cryptocurrencies, which will leave the CBDC digital yuan as the only crypto game in town, is a sign of what China is willing and able to do.
See more: China’s ‘comprehensive’ crypto ban paves the way for CBDCs
But, there will be plenty of clues in the coming months as to whether China will pass with ease or difficulty wooing the adoption of its first core commercial bank digital currency. It is best for developing countries from the US to the EU that are considering a CBDC to take this into account.
Read more: EU introduces plans for a post-pandemic digital wallet
Here are five things to watch to see if the digital yuan project succeeds:
Will consumers carry their own money? The digital yuan was very popular in initial tests, but those tests were a series of lotteries in which millions of dollars in CBDCs were awarded to tens of thousands of consumers — about $30 each — who spent a week downloading a copy of a digital wallet, claiming their money, and using it or losing it. .
Read more: China donates $41.5 million as country speeds up digital yuan tests
Now, consumers must be persuaded to download it themselves. However, the signals are good, according to the Digital Currency Institute at the People’s Bank of China. In November, it said that in the regions where the digital yuan is currently being tested, 10 million companies and 140 million people have signed up. However, it only reported 150 million transactions – indicating that these are one-time yuan digital transactions.
read this: China’s central bank: 10 million companies, 140 million people use the digital yuan
Will consumers add a second or third digital wallet? More than 90% of all Chinese mobile payments are made through AliPay or WeChat Pay. This basically means that everyone with a mobile device uses one or both, and they are accepted everywhere. Consumers can also take a “if it ain’t broke, don’t fix it” approach. That’s why China is trying to make the digital yuan more compatible with these dominant payment apps.
See more: China marries digital yuan, mobile payment apps
Now, that wouldn’t apply much in the US, where Apple Pay and Google Pay are used much less – just 4.5% of in-store purchases are made using mobile wallets, down 26% year over year. It is even worse in Europe, where nearly three-quarters of all consumer transactions take place in cash.
See also: Apple Pay at 7: Big Fish in the store’s small, shrunken mobile wallet pool
See also: Europe ready for instant payments as 73% of all transactions are still made in cash
Will merchants adopt it? Again, the vector economy factor will play a big role here, but adding and integrating a new POS system could be a valuable proposition. The lottery tests used a simple QR code system and only attempted to register a few thousand retailers. Traders can take an “if it ain’t broke” approach as well. However, if they paid lower transaction fees, e-CNY would look a lot better.
Read more: Ant Group looks to boost rating by raising Alipay commissions
Does privacy deter users? China’s response to the amount of privacy consumers will get when using the digital yuan is “controllable anonymity” – a concept it is pushing toward broader global adoption as CBDC rules are studied. Mu Changchun, president of the Cryptocurrency Institute, acknowledged that privacy could be a concern, but noted that fully anonymous cryptocurrency is impossible from the point of view of anti-money laundering laws alone.
Read moreChina pushes for global rules for central bank cryptocurrency
While the Chinese government could consider AliPay and WeChat Pay, a digital wallet created by the country could make the process a lot easier and more efficient. Then there’s the merchant side of the equation, where the same thing applies.
See also: China pressures ahead of CBDC release points for privacy issues
In the wake of the new Social Credit score, consumers may be concerned about giving the government more ammunition. On the other hand, if the use of the new e-CNY wallet boosts this result, it will be a huge selling point.
Will the digital yuan cross the border? China has been careful to say that its central bank digital currency will be an internal currency for the use of its people, and not a tool for displaying political and economic power. Last April, the Governor of the People’s Bank of China, Li Bo, said, “In order to internationalize the renminbi, we have said many times that it is a normal process, and our goal is not to replace the US dollar or other international currencies.”
However, by July, it had already released a white paper evaluating the digital yuan as a cross-border payment method.
See also: China evaluates the use of digital yuan for international payments