China's Digital Yuan is Scaling in 2022

China's Central Bank backed digital currency is growing fast in app downloads.

China has a unique ability to scale a product, especially if you are the Chinese Government boosted by Alibaba, Tencent, Baidu, Meituan and ByteDance. China’s BigTech are accelerating adoption of e-cny.

But how quickly is China’s CBDC actually scaling in terms of use? As of January 18th, 2020, it was reported that cumulative digital yuan transactions have reached 87.57 billion yuan ($13.68 billion), Zou Lan, director of the PBOC financial markets department, told reporters.

Distributed Ledger Centralized Digital Currently Goes Live in 2022

China was the first major economy to begin exploring its own digital currency in 2014, its E-CNY is really getting more wallets and app downloads in 2022. Unlike cryptocurrencies such as bitcoin, which are not centrally controlled, China’s “sovereign” digital coin would fall under the authority of the People’s Bank of China. China maintains a blanket ban on the trading of any cryptocurrencies, as the government regards them as a source of financial risk.

Instead of adopting crypto, countries have their central banks making a digital version of their own national currencies using blockchain technology but in a centralized way.

Whatever your feelings about decentralized crypto vs. centralized CBDCs, China’s ability to scale a product is fascinating to watch.

The central bank began testing the digital yuan about two years ago, but limited access and incentive for use have kept transaction value well below that of dominant mobile pay apps like Alipay.

As of January 18th, 2022 the e-CNY app had been used in transactions totalling US$13.8 billion by the end of December as the central bank pushed adoption of its digital currency.

The People’s Bank of China began conducting trials of the digital yuan and today it’s really going live in a big way and China can potentially allow its growth to disrupt other things occuring in global finance. China’s e-CNY essentially has a first-mover advantage and is augmented by China’s own BigTech and dynamic app ecosystem.

While the digital currency has no official nationwide launch date, but is being trialled in several cities and at the Winter Olympics venues, at least as per the plan of China originally. It’s unclear if Western people will be reluctant to use it.

It’s off to a rocky but good overall start, with the digital yuan transactions totaled 53.1 billion yuan in the second half of 2021, based on CNBC calculations of previously released figures. Various red envelope pilots have also been used to promote it and its adoption in Mainland China.

For context, Ant Group’s Alipay disclosed in 2020 that monthly payment volume averaged 10 trillion yuan. Ant Group is on the dog-house in China and among Chinese regulators. Even its IPO that would have been epic was canceled. If it survives it will be but a glimmer of its former self.

China has not announced an official timetable for the official launch of its Digital Currency Electronic Payment (DCEP) system. Furthermore all its different names is a bit confusing. These digital currencies are particular because they are Central Bank digital currencies (CBDCs). They are very different from cryptocurrencies or stablecoins.

Brands in China will adopt it invariably though as app downloads accelerate in 2022. For instance, foreign consumer brands, including US chains Starbucks, McDonald’s and Subway, were named by the People’s Bank of China (PBOC) as participants in the initial pilot programme, along with Ant Financial, Tencent and 19 local restaurants and retail shops in 2021.

E-CNY has around 270 Million individual Users by Now in Feb, 2022

Chinese ride-hailing giant Didi Chuxing said in July 2020 that it had entered into a “strategic partnership” with the central bank over the digital currency plan. There are likely hundreds of such partnerships by early 2022.

The wallet now has around 270 million users. As of the PR of January 18th, 2022 it’s apparently one of the fastest-growing apps in China right now, by installs, is the central bank’s digital yuan wallet: 261 million individual users (as opposed to enterprises), about one-fifth of the population, have set up e-CNY wallets so far.

In a year when China’s economy has a real-estate crisis, a demographics timebomb occurring and some serious concerns over flooding, unemployment and geopolitical tensions, this experiment is among the most interesting to watch if you are interested in China and the global economy at the intersection of technology, blockchain and FinTech.

So how fast is adoption in China actually occurring? It’s not that fast. The number of individual digital yuan users climbed to 261 million as of the end of 2021, an increase of 240.13 million from the end of June, according to the PBOC. Still if that was a global app in technology, nearly 300 million users is quite a lot.

Hong Kong is a major offshore yuan centre and a jumping-off point from which China can advance its ambitions to internationalise the yuan. However it remains to be seen exactly how it can or will do that. China’s geopolitical influence however is improving in many parts of the world. For instance, international collaboration has also accelerated between China’s central bank and its counterparts in Thailand and the United Arab Emirates.

China has tremendous influence now in parts of Africa, South America and Europe in addition to South-East Asia and a supposed “partnership” with Russia. China has tremendous “bargaining power” with Western and global brands as well since its consumer economy is so key to their own growth.

China’s digital yuan also has a blockchain for good component. Macau is seeking to better combat money laundering and tax evasion in the world’s biggest gambling hub, with the government set to work with China’s central bank to “study the feasibility of issuing a digital currency”. If distributed ledger tech is supposed to change the world, the way in which China is leveraging it is pretty interesting.

I actually like how clear and regulated things are becoming in China. While a lot of corruption still exists of course, regarding specific technologies, at least they know their place. 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.

In 2021 we heard how the U.S. is worried about the potential future dominance of China’s Digital Yuan. Apparently, the Biden administration was stepping up scrutiny of China’s plans for a digital yuan, with some officials concerned the move could kick off a long-term bid to topple the dollar as the world’s dominant reserve currency, according to people familiar with the matter. I’m not sure they or anyone completely understands China’s plan to leverage it and how and what it will accomplish.

Now that China’s digital-currency efforts are gathering momentum, officials at the Treasury, State Department, Pentagon and National Security Council are bolstering their efforts to understand the potential implications, the people said. Frankly it’s a bit too late for that with the American Fed behind the curve and dropping the ball on this as well. So much for the American blockchains.

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