The Chinese central bank digital currency (CBDC), the e-CNY, is available in 15 of China’s 23 provinces.
Moreover, they have used the CNY in over 360 million transactions worth 100.04 billion yuan ($13.9 billion), China.com claims. Additionally, the People’s Bank of China (PBOC) is giving billions of e-CNY away to promote the CBDC.
For example, the PBOC dispersed 40.2 million digital yuan worth $62 million through a lottery in Chengdu, FDI China reports. They are dispersing e-CNY through several commercial banks. Users can download an e-CNY wallet or use e-CNY in the Alipay and WeChatPay payment apps.
To encourage e-CNY use the PBOC held “red envelope” digital yuan lotteries in several Chinese cities. By December 2022, the digital yuan was live in 15 Chinese provinces, Computerworld claims.
CBDC Wallet is one of China’s most popular apps
They made the e-CNY Wallet app available in the Chinese Apple App Stores and Android stores in early 2022. By mid-January 2022 the e-CNY app had over 261 million users who conducted 875 billion ($13.75 billion) worth of transactions. Importantly, the e-CNY Wallet became one of China’s most popular apps.
The PBOC distributed 200 digital yuan vouchers (worth $30) to millions during the 2021 Lunar New Year Holiday. Users could use the vouchers at some brick and mortar stores and at the e-commerce outlet JD.com. Importantly, people in Hong Kong, Macao, and Taiwan could download those vouchers.
The PBOC has been testing the e-CNY in Hong Kong since June 2022. The Hong Kong Monetary Authority (HKMA) made e-CNY wallets available to Hong Kong residents, Bitcoin.com reports.
“This will help Hong Kong residents to use e-CNY when they cross the border,” HKMA Chief FinTech Officer Vincent Chow told reporters. To explain, the HKMA is Hong Kong’s central bank.
The HKMA is researching the possibility of creating an electronic Hong Kong dollar (e-HKD). They hope to test the e-HKD soon.
So What is the e-CNY?
There is an element of deception in the e-CNY. They claim the e-CNY is not a cryptocurrency, but it obviously is. Notably, private cryptocurrencies are illegal in China. However, there is no law against a central bank cryptocurrency.
The e-CNY is a cryptocurrency because they build in the blockchain just like Ethereum. To explain, a blockchain is a highly encrypted digital network that provides a far higher level of security and privacy than normal internet.
They are using the terms “e-CNY” and “digital yuan” to hide the e-CNY’s true nature. I consider the e-CNY a stablecoin. To explain, a stablecoin is a cryptocurrency that contains a digital mechanism they call a smart contract. A smart contract is a digital robot that performs a specific task.
For example, the e-CNY smart contract makes payment in yuan, or renimbi, (China’s fiat currency) from a PBOC account. People trust the e-CNY because it pays in the fiat currency. I think private stablecoins cannot compete with the e-CNY because the PBOC can issue unlimited amounts of yuan.
Hence, there is little chance of the e-CNY collapsing as the infamous TerraUSD stablecoin did in May 2022. The TerraUSD used a digital platform to supply the dollars the stablecoin distributed. When TerraUSD ran out of dollars, the stablecoins became worthless.
The Digital Yuan Outside China
PBOC officials hope to expand e-CNY use outside the People’s Republic.
Notably, the PBOC and the Bank of International Settlements (BIS) held the world’s largest cross-border CBDC test in between 15 August and 23 September 2022, Coinspeaker reports. To elaborate, the BIS is an international organization that provides technological and logistical support to central banks.
In the test, they tested e-CNY in 72 payment and foreign transactions. The transactions were worth 11.8 million yuan ($1.64 million). Five Chinese banks, the BIS, the PBOC, the HKMA, and the central banks of Thailand, and the United Arab Emirates participated in the test.
The test was part of Project mBridge. Project mBridge is an effort to build an official international infrastructure for CBDC transactions. The BIS Innovation Hub Hong Kong Centre, the HKMA, the Bank of Thailand, the Digital Currency Institute of the PBOC, and the Central Bank of the United Arab Emirates are conducting project mBridge.
Central Banks building own Blockchain
Project mBridge is developing a blockchain they call the mBridge Ledger. They are building the mBridge Ledger to support CBDC real-time payments, CBDC cross-border payments, and CBDC foreign-exchange transactions.
I think they conduct extensive further testing of Project mBridge before rolling to corporate customers. I suspect the principal uses of mBridge will be for corporate, bank to bank, government, and central bank transactions.
An obvious goal of Project mBridge is to create an alternate stablecoin and cryptocurrency market Central Banks can control. Another goal is to give central banks the ability to pump liquidity into the stablecoin and cryptocurrency markets.
To explain, I think central bankers fear cryptocurrency or stablecoin collapses could bring down the rest of the economy. In particular, central bankers fear people in some
