Bessie Liu

For the first time ever, the People’s Bank of China (PBOC) has included its central bank digital currency (CBDC) in official cash reports.



China’s digital yuan, otherwise known as e-CNY, amounted to 13.61 billion yuan (roughly $2 billion) by the end of December, per official figures reviewed by the South China Morning Post.



That <a href="https://www.scmp.com/economy/china-economy/article/3206421/china-digital-currency-e-cny-included-official-cash-figures-first-time" target="_blank" rel="noreferrer noopener">reportedly</a> converts to 0.13% of China’s outstanding monetary base supply.



Announced in 2019 and launched for public testing in April 2021, China’s CBDC has made its way into 26 different cities and into the hands of 5.6 million merchants.



Unlike bitcoin and ether, the digital yuan does not run on a blockchain or distributed ledger, and should not be considered anything similar to decentralized cryptocurrency, or even stablecoins such as tether and USDC.



It is money issued by the government via centralized <a href="http://www.pbc.gov.cn/en/3688110/3688172/4157443/4293696/2021071614584691871.pdf" target="_blank" rel="noreferrer noopener">technical</a> underpinnings more <a href="https://digichina.stanford.edu/work/lets-start-with-what-chinas-digital-currency-is-not/" target="_blank" rel="noreferrer noopener">akin</a> to traditional, fiat-powered payment apps such as Apple Pay.



Late last year, the Bank of China in Hong Kong offered 500 customers the opportunity to open trial accounts, where they would receive 100 e-CNY to spend in different stores across the mainland and at local supermarket chains.&nbsp;



The scheme received much interest and accounts were snatched within two days. Another stunt <a href="https://markets.businessinsider.com/news/stocks/china-cbdc-trial-digital-yuan-beijing-lottery-2021-6-1030486719" target="_blank" rel="noreferrer noopener">included</a> “red packet” lottery giveaways amounting to 40 million digital yuan ($6.2 million). 



The PBOC in October <a href="https://www.reuters.com/markets/currencies/chinas-digital-currency-passes-100-bln-yuan-spending-pboc-2022-10-13/" target="_blank" rel="noreferrer noopener">claimed</a> to have processed more than 100 billion yuan ($13.9 billion) in CBDC transactions, although those figures cannot be independently verified.



It’s still unclear how e-CNY will influence China’s online payments space and monetary policies. Beijing has been actively experimenting with how to implement the CBDC at scale.



China’s push for CBDC adoption has been <a href="https://www.orfonline.org/expert-speak/digital-yuan-is-the-renminbi-ready-to-take-on-the-dollar/">tied</a> to plans for more dominant currency when transacting with foreign countries, and hypothetically boosting the yuan’s position as a potential reserve asset.



David Canellis contributed reporting.



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CBDC

China Counts CBDC in Monetary Base Supply for First Time

Macauley Peterson

<div id="highlights-block_61d465da7eee2" class="highlights">
 <ul>
 <li>Government attempts to marginalize open public blockchains were a theme of 2021</li>
 <li>Government attempts to marginalize open public blockchains were a theme of 2021 New wallet is available for both iOS and Android</li>
 </ul>
 
</div>



Chinese efforts to roll out a digital yuan got a boost on Tuesday with the availability of a digital wallet for iOS and Android, according to the China blockchain news service <a href="https://twitter.com/BlockBeatsChina/status/1478213772288622595?s=20" target="_blank" rel="noreferrer noopener">Blockbeats</a> and <a href="https://www.reuters.com/markets/currencies/china-cbank-launches-digital-yuan-wallet-apps-android-ios-2022-01-04/" target="_blank" rel="noreferrer noopener">Reuters</a>.



The new app will link users&#8217; phone numbers to payment services provided by commercial banks using the Chinese central bank digital currency (CBDC). The eCNY is expected to eventually replace the payment rails offered by WeChat Pay and AliPay, the leading digital payment services in the country, <a href="https://cms.blockworks.co/china-isnt-replacing-wechat-pay-and-alipay-payment-rails-yet/">Blockworks previously reported</a>.



Coinciding with the digital wallet release, the People’s Bank of China unveiled its <a href="http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4438627/index.html" target="_blank" rel="noreferrer noopener">&#8220;FinTech Development Plan (2022-2025)&#8221;</a> today, which shows the importance financial planners place on the digitization of the economy. In the roughly 700-word document, the PBoC mentions “digital” (数字) 14 times.



Although neither blockchain technology, nor cryptocurrency is specifically discussed in the high-level overview, the trend has been toward exerting greater control over the trajectory of the country’s digital economy to ensure government access to financial data.



“What China is doing should be framed as less a currency issue…and more of a data issue,” <a href="https://twitter.com/SALTConference/status/1450568979005779982?s=20" target="_blank" rel="noreferrer noopener">said Yaya J. Fanusie</a>, adjunct Sr. Fellow at the Center for a New American Security at the SALT Conference in October 2021.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“We assess that China’s playing a different game or strategy with this project. It’s really trying to develop a digitized economy, and it’s trying to lay down infrastructure where the government can capture financial data,&#8221; said Fanusie.</blockquote>



Last year saw Chinese officials successfully expel most of the country’s Bitcoin mining operations over the Summer, <a href="https://cms.blockworks.co/chinas-global-bitcoin-hash-power-slips-to-0-heres-why/" target="_blank" rel="noreferrer noopener">effectively crushing</a> the contribution to the Bitcoin network&#8217;s hashing power within the country, and pushing the miners that remain <a href="https://www.cnbc.com/2021/12/18/chinas-underground-bitcoin-miners-.html" target="_blank" rel="noreferrer noopener">further underground</a>.



In November, officials moved to <a href="https://cms.blockworks.co/huobi-turns-off-derivatives-desk-in-china/" target="_blank" rel="noreferrer noopener">curtail derivatives trading</a> on the mainland and <a href="https://cms.blockworks.co/chinas-tech-giants-yes-on-nfts-no-on-cryptocurrencies/" target="_blank" rel="noreferrer noopener">set ground rules</a> for NFT marketplaces.



In its FinTech Development Plan, the PBoC laid out ​​”eight key tasks,” including accelerating the application of regulatory technology and capabilities, and building “a financial and technological risk firewall.”



Among US politicians, there is a clear <a href="https://cms.blockworks.co/senators-cant-agree-on-path-for-stablecoin-regulation-during-hearing/" target="_blank" rel="noreferrer noopener">lack of consensus</a> on how best to proceed with a government-issued digital dollar, as well as the specific contours of private stablecoin regulation. 



Some, like Rep. Brad Sherman (D-CA), have advocated following China’s lead in taking a hard line against all crypto assets. Other members of Congress argue for allowing room for innovation to develop, more in line with industry experts who warn that companies <a href="https://cms.blockworks.co/crypto-industry-will-move-offshore-if-congress-doesnt-act-executives-warn/" target="_blank" rel="noreferrer noopener">may be pushed overseas</a> if the regulatory situation in the US is not clarified.



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