Central bank digital currencies (CBDCs) are in various stages of development, launch and use around the globe — but one might argue that in Europe and the United States, it’s all a case of playing catch-up with China.
February looms as a red-letter month, then, for the CBDC landscape. Beijing is slated to roll out its digital yuan nationally as the 2022 Winter Olympics are held, as reported by Bloomberg.
The wider rollout would take place after a slew of trials, notably in retail and domestic settings, had been completed. Pilot tests in several cities have enabled users to purchase goods and services and pay for utilities and other bills.
Read also: China Tests Digital Yuan In Wage Payments
As Bloomberg reported, a number of banks and companies had set up shop at a trade fair this month to promote the digital yuan. And in an illustration of the interplay between mainstream commerce and the digital currency, companies such as JD.com and Ant Group had demonstrations of how apps would work with the CBDC and how payments could be taken at vending machines.
In a paper that debuted over the summer from the People’s Bank of China, titled “Progress of Research and Development of E-CNY in China,” the PBOC wrote that the digital yuan, at a high level, is envisioned as “a value-based, quasi-account-based and account-based hybrid payment instrument, with legal tender status and loosely-coupled account linkage.”
With a retail, domestic focus — and with the CBDC serving as a substitute for cash, according to the paper — the PBOC “issues e-CNY to authorized operators which are commercial banks, and manages e-CNY through its whole life cycle. Meanwhile, it is the authorized operators and other commercial institutions that exchange and circulate e-CNY to the public.”
Domestic Use — Initially
But although the initial focus will be on domestic use cases, the paper also notes the PBOC “will actively respond to initiatives of G20 and other international organizations on improving cross-border payments, and explore the applicability of CBDC in cross-border scenarios.”
Of course, anonymity remains a question, and the central bank makes mentioned of the concept of “managed anonymity,” wherein the anonymity will be in place for small value transactions, but information will be “traceable” for high value payments. In the latter case, said the bank, “it is necessary to guard against the misuse of e-CNY in illegal and criminal activities, such as tele-fraud, Internet gambling, money laundering, and tax evasion.”
The digital payment system would not provide information to third parties or other government agencies “unless stipulated otherwise in laws and regulations.” We note that the door is open here, of course, to indeed stipulate otherwise in those laws and regulations.
The targeted February rollout may have its technical issues, and of course with any massive currency initiative, education will be key. But then again, there’s already some semblance of critical mass in place for digital payments in that market, as WeChat and Alipay have been, and are being, used by hundreds of millions of consumers. Adding the digital yuan to the mix may be intuitive.
With the winter games just months away, and with 25 million eWallets opened to use the digital yuan as of this summer, the real life, real time launch of the digital yuan looms large. The rollout may prove instructive to other nations that are piloting their own CBDC deployments.
Support for those CBDCs is growing. Euronews reported that, per surveys of more than 31,000 Europeans over the summer, significant percentages (though still minorities) of individuals were in favor of CBDCs created to “assert monetary independence from the EU.” In Italy, 41 percent voiced that sentiment, compared to 40 percent in Greece.
That sentiment comes as the Bank of International Settlements said recently, as noted in this space, that central banks need to accelerate their CBDC efforts.
Learn more: Official Urges Central Banks to Adopt Digital Currency
There are, of course, any number of individual initiatives at play here in the EU. In one recent example, Turkey’s central bank said it had set up the Digital Turkish Lira Collaboration Platform to further research the possibilities of a digital currency.
Read here: Turkey’s Central Bank Looks at Digital Currency; Crypto Wealth Management Platform Abra Nets $55M
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