China’s central bank has made public a pilot version of an app for the e-CNY — the world’s first major economy central bank digital currency (CBDC) — on Apple and Android app stores, as the country accelerates its efforts to promote its own digital currency.
The pilot app — developed by the Institute of Digital Currency of the People’s Bank of China (PBOC) — was previously only available with private links. However, only residents in selected trial regions are qualified to register, according to the landing page of the app.
At the moment, only users in Shenzhen, Suzhou, Xiong’an, Chengdu, Shanghai, Hainan, Changsha, Xi’an, Qingdao, Dalian and venues for the Beijing Winter Olympics in Beijing and Zhangjiakou may register for the e-CNY app.
The PBOC created the e-CNY app in cooperation with a number of banks, including Industrial and Commercial Bank of China, Agriculture Bank of China, Bank of China, China Construction Bank, Bank of Communications, Postal Savings Bank of China, China Merchants Bank, Tencent-backed WeBank and Ant Group-backed MYbank.
The PBOC’s move to launch the e-CNY app on app stores comes a few weeks prior to the Lunar New Year, which falls on Feb. 1 this year, when people in China traditionally give out red packets as lucky money for good fortune in the coming year.
However, while China is getting prepared for a roll-out of its sovereign digital currency, with mobile payment platforms such as Alipay and WeChat Pay already being ubiquitous, it could be a challenge to get people to switch to the e-CNY. Alipay and WeChat Pay control over 90% of the Chinese nonbank payment market.
“The e-CNY does seem safe with its traceability,” said Lecheng Lin, a 22-year-old who works in the financial industry in Shanghai. “But it doesn’t seem to be very convenient as it doesn’t come with all the utility payment features (that are built within Alipay and WeChat Pay).”
One 24-year-old who works in the media industry in Beijing told Forkast.News that she would prefer using Alipay over the e-CNY given the former’s wealth management features. Another 26-year-old who works in the medical industry said she has opened a wallet to support the promotion work of a friend who works in the Agricultural Bank of China, but has never spent a penny from it.
“Digital yuan use during the trial period will likely have a slow but steady uptake in China as people already have access to great digital payment through the payment platforms,” Richard Turrin, a Shanghai-based fintech consultant who’s published “Cashless: China’s Digital Currency Revolution,” told Forkast.News.
“It is important to understand that these are trials and not all stores accept the e-CNY yet, so people will be hesitant to switch,” Turrin said, adding that once the e-CNY system goes live throughout the country, one can expect steady growth in part generated by payments for salary, transportation and social services. “Eventually salaries will be paid in e-CNY as shown by the trials JD.com has already carried out,” he added.
Matteo Giovannini, a senior finance manager at Industrial and Commercial Bank of China, one of the nation’s biggest commercial banks, told Forkast.News that in the medium-term the digital yuan will likely co-exist with these payment platforms, but “in the long-term people will start to realize the convenience of the sovereign digital currency, since it is a legal tender that is not linked to a single company platform and therefore it can be transferred across different e-wallets.”
Giovannini added the fact that e-CNY is 100% programmable and trackable means that a wider adoption of it would certainly bring an increased level of monitoring of capital flows as well as a considerable improvement in the transmission of central bank’s monetary policies to the economy.
“I do not expect that the PBOC will use the e-CNY to conduct macroeconomic policy for some years,” Turrin said. “They will need to wait for broader uptake and research usage patterns before using the e-CNY as a policy tool.”
The e-CNY’s use in surveillance of financial transactions, however, is “highly misunderstood due in part to a substantial amount of fear-mongering surrounding CBDCs in general and of course anything associated with China’s digital ecosystem,” Turrin said.
“The irony is that few seem to understand that e-CNY users will have better privacy transacting in e-CNY than they will with the excellent but data hungry payment platforms,” Turrin added.
However, some have expressed concerns over privacy. In a white paper released in July, the PBOC noted that the e-CNY is not a 100% anonymous system, but supports “managed anonymity” with tiers of complexity based on know-your-customer needs.
Also in July, three U.S. senators wrote to the country’s Olympic and Paralympic Committee to urge it to “forbid American athletes from receiving or using digital yuan during the Beijing Olympics,” due to privacy concerns.
As the Beijing Winter Olympics — set to start on Feb. 4 — approaches, Giovannini said a full rollout of the e-CNY is likely to happen at the upcoming games. “A broader use by domestic and international customers during the event represents a golden opportunity for China to proliferate the use of its digital wallets and to substantially boost the yuan’s international status.”
But Turrin said China might as well take its time. “The plan was always to use the Olympics to showcase the e-CNY but not launch it in full,” he said. “The eyes of the world are on the PBOC and there is no need for them to rush.”
Meanwhile, China is also studying the cross-border transaction possibilities of the e-CNY. For example, Guangxi, China’s southern provincial-level region, is researching cross-border finance and e-CNY applications, according to local media Guangxi Daily. The Guangxi autonomous region — often seen as a gateway for Association of Southeast Asian Nations (ASEAN) trade — plans to support cross-border circulation of capital.
This came as the Regional Comprehensive Economic Partnership (RCEP) — a free-trade agreement between China, seven ASEAN countries, South Korea, Japan, Australia and New Zealand — came into force on Jan. 1.