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China’s central bank digital currency (CBDC) is now accessible on mobile phone app stores, in another significant move for the currency’s trial phase.
Developed by the Digital Currency Research Institute, a department in the People's Bank of China (PBOC), versions of the digital yuan app were opened to Chinese users of IOS and Android app stores on January 4.
So far, digital yuan, or e-CNY wallet, owners have been able to transfer money between their bank accounts and wallets, as well as to other e-CNY users.
Consumers are also able to undertake online and offline payments through similar methods to how they use Alipay and WeChat Pay, which are the dominant mobile payment systems in China.
In keeping with the PBOC’s pilot period, the e-CNY will be restricted to the following cities — Shenzhen, Suzhou, Chengdu and Xiong'an — where testing began in April 2020, as well as Shanghai, Hainan, Changsha, Xi'an, Qingdao and Dalian, where the pilot phase was extended to in April 2021.
“e-CNY use during the trial period will likely have a slow but steady uptake in China as people already have access to great digital payments through existing payment platforms,” said Richard Turrin, a Shanghai-based fintech consultant and author of "Cashless: China’s Digital Currency Revolution", speaking to VIXIO.
Some 140m people had opened wallets for China's new digital yuan as of October and usage totalled around 62bn yuan ($9.7bn), according to a senior official at the PBOC in October last year.
Critics who jump on this slow uptake as a sign of failure, as some already have, are wrong, Turrin argued, pointing out that it is still in the trial phase and that not all merchants are able to accept the e-CNY yet.
“Once the e-CNY system goes live throughout the country expect steady growth in part generated by payment of salary supplements for transportation and social services in e-CNY. Eventually, salaries will be paid in e-CNY as shown by the trials already carried out by JD,” he speculated, referring to the Chinese retailer.
According to Turrin, macroeconomic use of the e-CNY is unlikely for sometime yet, but is a likely move the PBOC will make.
“They will need to wait for broader uptake and research usage patterns before using CBDC as a policy tool,” he said. “This will take a while but will happen.”
With the Winter Olympics due to take place from February 4 this year, there is speculation that the e-CNY will be shown off to international visitors then.
“The PBOC’s plan was always to use the Olympics to showcase the e-CNY but not launch it in full,” said Turrin. “The eyes of the world are on the PBOC and there is no need for them to rush. They will be meticulous to ensure their new CBDC works properly before a nationwide rollout.”
In October, Mu Changchun, the director-general of the PBOC’s digital currency institute, outlined at a fintech conference the four different digital wallets that will be available to e-CNY users.
These include one that is entirely free of transaction caps. Yet, this wallet option will also have the highest level of due diligence, needing to be opened at a brick and mortar bank, with personal identification.
