China’s digital yuan wallet now has 260 million individual users

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The People’s Bank of China’s digital yuan wallet is currently one of the fastest-growing apps in China in terms of installs. According to Zou Lan, head of financial markets at the People’s Bank of China (PBOC), 261 million individual users (as opposed to enterprises) have set up e-CNY wallets so far, accounting for approximately one-fifth of the population and 87.5 billion yuan ($13.78 billion) worth of transactions have been made using the digital fiat currency.

China has been testing the use of the digital yuan in several major cities, including Shenzhen, for the past two years. People had to enter a drawing and apply to be among the first to utilize the service. The PBOC then made the e-CNY wallet available on the iOS and Android app stores in China at the beginning of 2022, clearly indicating that the trial would be accelerated.

There is no way that the digital yuan manifests cryptocurrency, which is now prohibited in China. The People’s Bank of China (PBOC) has declared bitcoin and other cryptocurrencies to be highly volatile, speculative, and devoid of fundamental value and has warned that cryptocurrencies might be used as a tool for money laundering.

The e-CNY seeks to provide outcomes that are distinct from the norm. Issuance by the central bank serves as the statutory, digital equivalent of China’s money in circulation, or “M0.” Indeed, the government hopes to make e-yuan payments operate even if there is no internet connection, thanks to the near-field communication (NFC).

Specifically, according to a research paper published by the Central Bank’s Working Group on e-CNY Research and Development last year, the digital yuan aims to: diversify the types of cash provided to citizens by the central bank, meet the public’s demand for digital currency and promote financial inclusion; support fair competition in retail payment services, as well as efficiency and security; echo international initiatives and investigate ways to improve cross-border payment.

Even though the e-CNY wallet is now available for download in the Chinese app stores, only users in a select number of pilot cities and at the upcoming Winter Olympics venue will be able to sign up, fund their accounts, and spend the virtual currency in one of the 8 million “pilot scenarios,” which include making purchases on Alibaba and paying for Didi rides, among other things.

Users will have to transfer money from one of the commercial banks allowed by the People’s Bank of China to operate and circulate the digital currency, including digital-only banks such as Tencent-backed WeBank and Ant-backed MyBank, to convert cash into e-CNY.

e-CNY is intended to “complement,” rather than “replace,” popular Chinese payment services such as Alipay and WeChat Pay, according to the PBOC’s report on the subject. For example, it might provide anonymity for small-value transactions in the same way that actual currency does. In other cases, large sums of money transferred from a provincial government to a municipality could be paid in e-CNY to prevent corruption by taking advantage of the traceability provided by the digital currency.

But at the end of the day, if e-CNY intends to build a significant active user base, it will need to compete with the private payments giants in terms of user experience.

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