In a recent speech, Mu Changchun, the director of the Digital Currency Research Institute of the People’s Bank of China (PBOC), emphasized the importance of making the digital yuan accessible and convenient for all kinds of retail transactions. He said that the digital yuan, also known as e-CNY, should be compatible with various payment scenarios and devices, such as smartphones, smart watches, QR codes, and facial recognition.
The digital yuan has significant implications for the global economy and the international monetary system. As the world’s second-largest economy and the largest trading nation, China has a strong influence on global trade and finance. The digital yuan could enhance China’s economic competitiveness, financial sovereignty, and geopolitical influence. It could also challenge the dominance of the US dollar as the global reserve currency and facilitate the internationalization of the renminbi, China’s official currency.
Mu also outlined the four main features of the digital yuan: controllable anonymity, loose coupling, offline payment, and smart contracts. He explained that controllable anonymity means that the digital yuan protects the privacy of users while complying with anti-money laundering and anti-terrorism financing regulations.
Loose coupling means that the digital yuan does not rely on bank accounts or mobile phone numbers to function. Offline payment means that the digital yuan can be transferred between users without internet connection. Smart contracts mean that the digital yuan can support programmable functions, such as automatic payments and expiration dates.
According to Mu, the PBOC has been conducting pilot tests of the digital yuan in various cities and regions across China, involving more than 140 million personal wallets and 10 million corporate wallets. He said that the pilot tests have covered a wide range of scenarios, such as public transportation, catering, e-commerce, utility bills, and government services. He added that the PBOC will continue to expand the scope and scale of the pilot tests and cooperate with other countries and regions to explore cross-border applications of the digital yuan.
Mu stressed that the digital yuan is not intended to replace cash or existing payment methods, but to complement them and provide more options for consumers and businesses. He said that the digital yuan is a legal tender issued by the PBOC, and that its value is backed by the full credit of the central bank. He also assured that the digital yuan is safe and reliable, and that its design and operation follow the principles of stability, security, efficiency, and inclusiveness.
However, the digital yuan also faces some challenges and risks, such as technical issues, regulatory uncertainty, public acceptance, and international coordination. Moreover, the digital yuan raises some concerns about privacy, surveillance, and cybersecurity, as the PBOC will have access to a vast amount of transaction data and have the ability to monitor and control the flow of money. The digital yuan could also pose a threat to the existing financial intermediaries, such as banks and payment platforms, as they may lose market share and revenue to the PBOC.
The digital yuan is a pioneering and ambitious project that could reshape the future of money and finance. It is also a strategic move by China to gain an edge in the emerging digital economy and to assert its role in the global arena. The digital yuan is not only a matter of technology, but also of politics and power. It is therefore important for policymakers, businesses, and consumers around the world to pay close attention to its development and impact.
Despite many predictions to the contrary, China may never overtake the U.S. as the world’s biggest economy, according to Bloomberg Economics. The nation’s recent growth slowdown could presage an era of roughly 1% growth by 2050, the report notes, and is shifting perceptions about China’s ability to roar past the U.S. Concerns over how China is managing its economy and the nation’s worsening property crisis are two of the main reasons for the more downbeat assessment. Economists had initially been more optimistic about China’s economic recovery prospects after an elongated closure for the pandemic. (LinkedIn News)
