China rolls out more testing of national digital currency
Annabelle Huang recently won a government lottery to try China’s latest economics experiment: a national digital currency.
After joining the lottery through the social media app WeChat, Huang, 28, a business strategist in Shenzhen, received a digital envelope with 200 electronic Chinese yuan, or eCNY, worth around $30.
To spend it, she went to a convenience store near her office and picked out some nuts and yogurt. Then she pulled up a QR code for the digital currency from inside her bank app, which the store scanned for payment.
“The journey of how you pay, it’s very similar” to that of other Chinese payments apps, Huang said of the eCNY experience, though she added that it was not quite as smooth.
China has charged ahead with a bold effort to remake the way that government-backed money works, rolling out its own digital currency with different qualities than cash or digital deposits.
The country’s central bank, which began testing eCNY last year in four cities, recently expanded those trials to bigger cities such as Beijing and Shanghai, according to government presentations.
The effort is one of several by central banks around the world to try new forms of digital money that can move faster and give even the most disadvantaged people access to online financial tools. Many countries have taken action as cryptocurrencies such as Bitcoin, which has recently soared in value, have become more popular.
But while Bitcoin was designed to be decentralized so that no company or government could control it, digital currencies created by central banks give governments more of a financial grip. These currencies can enable direct handouts of money that expire if not used by a particular date and can make it easier for governments to track financial transactions to stamp out tax evasion and crack down on dissidents.
Over the last 12 months, more than 60 countries have experimented with national digital currencies, up from just over 40 a year earlier, according to the Bank for International Settlements. The countries include Sweden, which is conducting real-world trials of a digital krona, and the Bahamas, which has made a digital currency, the Sand Dollar, available to all citizens. In contrast, the United States has moved slowly and done just basic research.
Yet no major power is as far along as China. Its early moves could signal where the rest of the world goes with digital currencies.
While the Chinese government has not said if and when it will officially introduce the eCNY nationwide, several officials have mentioned having it ready for tourists visiting for the 2022 Olympics in Beijing.
Recent articles and speeches from officials at the People’s Bank of China, which is the country’s central bank, underscored the project’s ambitions and the desire to be first.
The People’s Bank of China did not respond to a request for comment.