While the Olympic Games are the world’s premier showcase for athletes to display their skills, a star of an entirely different kind is also grabbing the spotlight in Beijing – the e-CNY, or electronic yuan. And, so far, it looks as if the world’s first digital currency issued by the central bank of a major economy is set to take the top spot on the podium.
On the opening day of the 2022 Winter Olympics, significantly more transactions were reportedly made with China’s central bank digital currency (CBDC) than through Visa, which has traditionally been the champion at such events, according to CoinTelegraph. Visa held the Games’ electronic payment rights since 1986. It was, apart from cash, the only method to purchase tickets or concessions at Olympic venues. If you were looking to book tickets online for Olympic events, you would need a Visa card.
The main reason for the yuan’s stunning performance was probably summed up by 42-year-old media professional Cai Qianyi, who used his smartphone to buy roast chicken and broccoli at the Main Media Centre before the start of the games. “This is very convenient compared to carrying cash, this way I avoid touching currency notes,”Bloomberg reports that Cai claimed this.
It is important to be convenient. Customers can use e-CNY to make payments in a variety of ways. These include wallet apps for their phones, cards and badges as well as wearables like ski gloves, smartwatches and smartwatches. Sim Pay is a brand new e payment tool by telecom giant China Mobile. You can pay with eCNY even without a mobile app or network connection. Digital yuan can be used to pay for many services outside the Olympic venues. These include transport, food and hotels as well as shopping, entertainment and healthcare.
Indeed, more than 400,000 payment scenarios have been covered at the Olympics as part of the digital yuan’s pilot project, with transactions exceeding 9.6 billion yuan ($1.509 billion), says Wang Ying, deputy director of Beijing’s Local Financial Supervision and Administration. As the pilot digital yuan project continues to expand, more scenarios will be covered.
eCNY can be used as a CBDC
The difference in digital yuan and Apple Pay is not obvious to the consumer. However, the process behind your swipes can be quite interesting. Digital yuan uses some of the same elements that are used for cryptocurrencies. A digital ledger records every transaction and makes it traceable. The digital currency, which is fully-backed by the central bank, has more similarities to its counterpart in paper. CBDC can be used to pay for goods and services directly, just as with cash. You don’t need a bank account. The money you have in the bank is literally a loan that you’ve made to the bank, and credit on your credit card is a potential loan the bank may make to you.
The People’s Bank of China set out to develop a digital currency in 2014 and began working with commercial banks and internet companies to that end in 2017. It researched the project for six years before launching pilot programs in Shenzhen, Suzhou, Chengdu, and Xiong’an. In late 2019, the digital yuan was introduced in 10 Chinese cities including Beijing and Shanghai.
China launched an e-CNY promotional campaign in December 2020. Shen Xue (a retired Chinese pair skater) swiped a Beijing metro turnstile with his digital yuan wallet and ski gloves. He became the first to use the currency to pay for a subway ride. This event was recorded on video for an advertisement that aimed to target people from overseas interested in attending the 2022 Winter Games. According to China’s Central Bank, by January, over 261 million individual users across the country had registered a digital yuan wallet, which is double the number in October, as reported by Al Jazeera.
Why did China decide to make its own digital currency?
China CBDC decision
First of all, the digital yuan will strengthen the Chinese Central Bank’s control over the circulation of money in the country’s economy. With the help of its own digital currency, the regulator will be able to increase the level of transparency of economic transactions, quickly identify possible money laundering schemes, and better manage the country’s monetary supply.
China is certain that it wants to shake the US grip on global finance by setting up its own CBDC. China has to have an alternative plan in the event that it loses access to SWIFT (the service which facilitates international banking transfers) due to rising tensions. According to Anthony Chan (chief Asia investment strategist at Swiss bank UBP), individuals and businesses will now be able transact across borders without any problems using the digital Yuan.
China also launched its CBDC to fight the spread of cryptocurrencies. They are considered a threat by the Central Bank. This is because cryptocurrencies are a major threat to China’s economy. Chinese businesses have used cryptocurrencies and stablecoins in recent years to bypass strict controls on cross-border transactions. Three years ago, media reported that both Chinese and Russian companies used the USDT stablecoin for mutual settlements. The daily average purchase was $30,000,000! Transactions made with cryptocurrencies are impossible to freeze because control over it’s completely in the hands of their owner. Regulators can block transactions using digital yuan because they are simple to trace. China wants to regain control over these cross-border cash flow multibillions of dollars by using the digital currency.
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