Over a year and a half since the start of pilot tests of its central bank digital currency (CBDC), China has the chance to give its digital yuan an international debut at the Beijing Winter Olympics. But safety measures due to the Covid-19 pandemic plus geopolitical tensions have dramatically altered expected Olympics attendance.
Will China still opt for a big splash or hold back? If the most populous nation chooses the latter, experts anticipate the digital yuan, or e-CNY, will nonetheless launch this year, and it would still be the world’s first major CBDC. So here are five questions — and some answers — about the current state of the digital yuan and what to look for at the games.
Will the games be the official launch for digital yuan?
This is the billion-dollar question. China has not officially announced a launch and instead couched the use of digital yuan at the Olympics as a showcase. But for almost a year, many following China’s progress in developing digital yuan were convinced the timeline included an Olympics’ debut. Given the downscaling of the live audience due to the pandemic and geopolitics, some are no longer so sure.
Matteo Giovannini, a senior finance manager at Industrial and Commercial Bank of China, one of the nation’s biggest commercial banks, told Forkast that a full rollout of the digital yuan 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.”
Stanley Chao, managing director of Asian business strategy firm All In Consulting and author of “Selling to China: A Guide for Small and Medium-Sized Businesses,” no longer believes the games will be the official full launch of the digital yuan, simply because China hasn’t achieved scalability. “They’ll need to get to at least US$100 billion before an official launch,” he said. Cumulative transaction volume reached 86 billion yuan, or US$11 billion, at the end of 2021, the central bank — the People’s Bank of China (PBOC) — reported this month.
If indeed China refrains from a full launch, it will not be much of a loss, said Richard Turrin, a Shanghai-based fintech consultant and author of “Cashless: China’s Digital Currency Revolution.” He told Forkast that China might as well take its time. “The plan was always to use the Olympics to showcase the digital yuan 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.”
Why does China care about showcasing the digital yuan at the Winter Olympics ?
The Olympics is one of the world’s most-watched live events with an attendance in the millions and a global remote audience of billions. During the last Winter Olympics — PyeongChang 2018 — 28% of the earth’s population watched the games in some form. 300 million users consumed social media about PyeongChang, resulting in over 1.6 billion video views. More than a million tickets were sold for events and ceremonies, according to the International Olympic Committee.
Showcasing the digital yuan on such an enormous stage would add a flourish to the message that China is the first global economic power to adopt a fiat digital currency.
“Just as the 2008 Beijing Summer Olympics was a coming-out party to show the world that China was now a major player in the world’s stage, this Winter Olympics shows the world that China is in the forefront of technology and CBDC exemplifies the future vision and aspirations of the [Chinese Communist Party,]” Chao said.
“[Showcasing the digital yuan at the Olympics] is a marketing plan to promote China and the CCP,” Chao told Forkast.
How has China prepared for an Olympics demonstration of digital yuan?
China began pilot testing of the digital yuan over a and a half year ago, at the site of the Olympic Village 11 miles north of the former emperor’s palace, in the Chaoyang District of Beijing. The PBOC dropped three batches of digital yuan in June, October, and December 2021. The pilots both promoted wider use of digital yuan and tested micropayments in large volumes for stores and public transportation expected for use at the Winter Olympics.
There was additional testing in Zhangjiakou, the site of skiing events, to pilot test digital yuan uses specific to Olympic athletes, including digital yuan payments for transportation between venues and airports, gas stations and bus terminals as well as for highway tolls.
Will non-Chinese nationals use the digital yuan?
As the pandemic begins its third year, the Winter Olympics’ in-person audience has shrunk dramatically. The International Olympic Committee announced in September that spectator tickets will be sold only to residents of mainland China to avoid making it a superspreader event. Political tensions have also arisen over China’s treatment of Uyghurs. In protest of alleged human rights abuses, Australia, Canada, the U.K. and the U.S. have all announced diplomatic boycotts of the games, further reducing attendance. Potential international digital yuan users will be limited to athletes and their support staff as well as diplomats.
But even that potential audience is constrained. Citing a lack of privacy and the risk of user surveillance by China, three U.S. senators wrote a letter in July asking American athletes not to use digital yuan.
“China was … looking to test the scalability of the [digital yuan] during the Winter Olympics, but they certainly won’t get a large number of users and transactions with a quarantined Olympics,” Chao said. He believes the event is now more a test to determine whether foreigners are willing and able to use the digital wallet.
What could global consumers buy with digital yuan?
Short-term global travelers visiting China will be able to set up an e-CNY-enabled digital wallet without needing to open a Chinese bank account, according to a white paper released by the PBOC in July that spelled out the progress of digital yuan development.
For the convenience of international attendees, Olympic venues will have ATMs to convert various fiat currencies into digital yuan. ATMs that China has launched can load digital yuan onto existing wallets or provide wallets for digital yuan as well.
All merchants in Olympics venues will accept digital yuan payments. It can be used to pay for catering, accommodations, shopping and transportation, according to Science and Technology Daily’s report.
