"China is pushing for broader use of its digital currency"

" \n China is pushing for broader use of its digital currency \n \n\n \n China is ramping up efforts to roll out the digital yuan to the broader population, as the country\u2019s technology giants like Alibaba and Tencent jump on board. \n \n\n \n But there are challenges ahead and one particular question stands out: Will Chinese citizens \u2014 who already use two dominant mobile payment systems run by these same tech firms \u2014 begin paying with the digital yuan? \n \n\n \n The People\u2019s Bank of China (PBOC), the country\u2019s central bank, has been working on the digital form of its sovereign currency since 2014 . \n \n\n \n Also known as the e-CNY, it\u2019s designed to replace the cash and coins already in circulation. It is not a cryptocurrency like bitcoin, in part because it\u2019s controlled and issued by the central bank. Bitcoin is a decentralized digital currency that isn\u2019t backed by any central banks or a single administrator. \n \n\n \n China\u2019s digital yuan is a form of central bank digital currency (CBDC) which many other central banks around the world are also working on \u2014 though the Chinese central bank is way ahead of its global peers. \n \n\n \n To date, the PBOC has been\u00a0 piloting the digital currency via lotteries , and tens of millions of digital yuan have been handed out to citizens in a handful of cities in China. \n \n\n \n Chinese authorities are now stepping up their ambition to expand the use of e-CNY to more citizens even though a nationwide rollout date has not been set. \n \n\n \n \u201cIt feels to me like they\u2019re now ready to push this out wider,\u201d Linghao Bao, analyst at consultancy Trivium China, told CNBC. \n \n\n \n Tech giants on board \n \n\n \n Last week, the PBOC launched an app to allow users in 10 areas, including major cities Shanghai and Beijing, to sign up and use the digital currency. \n \n\n \n The two dominant payment systems in China are Tencent\u2019s WeChat Pay and Alipay, which is run by Alibaba affiliate Ant Group. \n \n\n \n Perhaps the most significant push came on Thursday when Tencent announced that its WeChat messaging app would support the digital yuan . WeChat has over 1 billion users and is integral to daily life in China. \n \n\n \n Alipay is also a partner for the digital yuan. \n \n\n \n One potential challenge for the PBOC is getting people to download their new digital yuan app and switch from WeChat and Alipay. Hence, integration with WeChat is key and gives the e-CNY a potentially huge user base. \n \n\n \n Read: Global inflation, forex reserve depletion could push CBN to increase interest rates \n \n\n \n On Friday, e-commerce giant JD.com said that it would begin facilitating third-party merchants that sell on its platform to start accepting the e-CNY. \n \n\n \n JD.com has been an early partner for the digital yuan and previously accepted it for payment on a few occasions . Now, it\u2019s looking to expand that further. \n \n\n \n Will people continue using the digital yuan? \n \n\n \n While there are still unknowns over the technical make-up and other factors behind the digital currency, one of the more immediate questions is whether people will use the e-CNY regularly, even as the central bank tries to push for wider usage. \n \n\n \n To use WeChat or Alipay for example, users just link their bank account to the app. But to use the digital yuan, users will need to sign up a separate app and link that to their WeChat or Alipay or use the digital yuan app. \n \n\n \n \u201cThe big question we have is whether consumers are going to use this or not. To me, there is no strong incentive for consumers to switch [from their current systems],\u201d Bao said. \n \n\n \n \u201cI don\u2019t see any strong incentive because there is still friction to use digital yuan,\u201d he said. \u201cYou have to download the app, sign up, then top up your wallet. I\u2019m not sure consumers want to go through these extra steps.\u201d \n \n\n \n While the PBOC has used digital yuan lotteries to effectively hand out free money and get users on board, Bao questioned what will entice citizens to continue using the digital yuan after they\u2019ve spent that money. \n \n\n \n \u201cHow are you going to make people keep using the digital yuan?\u201d he asked. \n \n\n \n Beijing Olympics \n \n\n \n China\u2019s central bank previously stated its intention to make the digital yuan available to visitors to the Beijing Winter Olympics. \n \n\n \n The venues for the 2022 Games in Beijing will be able to use the e-CNY app there. But overall, transaction volume is unlikely to match that seen by Alipay and WeChat Pay, according to Paul Triolo, head of the geo-technology practice at risk consultancy Eurasia Group. \n \n\n \n \u201cFor the foreseeable future, even if there is an uptick at the Winter Olympics, the transaction turnover rate of the central bank digital RMB is likely to be very tiny in comparison to popular payment platforms WeChat Pay and Alipay,\u201d Triolo said. The Chinese currency is also referred to as the\u00a0renminbi, or RMB. \n \n\n \n \u201cHowever, over time, there may be some niche areas where the digital RMB could see greater use, such as paying certain types of government related bills, or for things like transportation, particularly if the central bank offers incentives like red envelopes and other inducements.\u201d \n \n\n \n Meanwhile, China\u2019s so-called \u201czero Covid\u201d approach has led to strict measures to try to stamp out the virus in China \u2014 that means very few foreign visitors will be attending the Winter Olympics in Beijing. \n \n\n \n \u201cThough the Olympics were originally viewed by Chinese authorities as a chance to showcase the potential use of the currency in an international setting, it is likely that few non-Chinese citizens will use the digital RMB wallet at the Games,\u201d Triolo added. \n \n\n \n The Games would have been the first real opportunity to see how the digital yuan will work for tourists and overseas visitors to China, but that opportunity is gone. \n "

"China is pushing for broader use of its digital currency"

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