Shen Xue, a retired Chinese pair skater and 2010 Olympic champion, appeared on Chinese media in December 2020 as the first person to purchase a Beijing Subway pass using the country’s official digital money. Shen celebrated the start of China’s campaign to market its central bank digital currencies overseas during the 2022 Beijing Winter Olympics by swiping the turnstile with ski gloves equipped with the latest digital yuan wallet. The Winter Olympics were supposed to be a big premiere for the e-CNY, a digital version of China’s sovereign currency that would be seen by millions of people across the world. Without a local bank account, foreign visitors will be able to use e-CNY to purchase things at the games, which begin on Friday.
With the emergence of the COVID-19 epidemic, which locked the Chinese capital to the rest of the world, those plans went awry. Beijing has adopted a “closed-loop system” for the games, which isolates the 11,000 participants from the general public as part of a “zero COVID” policy aimed at preventing any virus transmission.
The People’s Bank of China, a forerunner in the development of central bank digital currencies (CBDCs), first proposed a digital yuan in 2014, while its colleagues were still assessing the benefits of virtual currencies. CBDCs are issued and managed by a central government, unlike cryptocurrencies, which China banned last year because of worries about financial stability and crime. The central bank announced in January that more than 261 million individual users have enrolled for a digital yuan wallet, an app that allows users to utilise e-CNY. Since October, the number of users has roughly doubled.
According to the Beijing Financial Supervision Authority, Beijing has been pilot-testing its digital currency for usage at the games for more than a year, with 9.6 billion CNY ($1.5 billion) in transactions by the end of 2021.
Before the Olympics, the city tested the digital yuan in over 400,000 “scenes” involving real transactions of products and services, according to the regulator, with over 12 million individual users and 1.3 million business users in the capital registering on the app. Mobile payments handled a record 432 trillion yuan ($67.9 trillion) in transactions in 2020, largely on Alibaba’s Alipay and Tencent’s WeChat Pay. Last year, Bloomberg Intelligence predicted that by 2025, the digital yuan would have a 9% domestic market share. Alipay and WePay are thought to have a combined market share of over 90% at the moment.
According to Suji Yan, founder of Mask Network, a Singapore-based cryptographic and encryption start-up, transitioning from tech giants’ digital payments to a CBDC is a simple transition for Chinese citizens. They are already paying with internet giants such as WeChat and Alipay, and the shift [of payment applications] makes no difference to the majority of Chinese customers.
Distrust overseas
Beijing’s Olympic showcase for the digital yuan may be met with scepticism abroad, owing to a rising mistrust of Chinese technology, particularly in terms of data protection and regulatory monitoring. For overseas users, anonymity and privacy are the most pressing concerns when it comes to using the digital yuan. According to official media Xinhua, four levels of user categorization are currently accessible, allowing users to choose how much information to submit with the digital wallet app in order to meet different usage restrictions. Even in the most basic model, with simply a cell phone number, no one believes their transactions will be completely anonymous and private.