China continues to expand the test runs of the E-Yuan. The Central Bank Digital Currency is intended to help push the US dollar off the throne as the world’s leading currency.
China is rolling out the E-Yuan. As a Central Bank Digital Currency (CBDC), it is initially essentially a digital representation of the national currency of the country. And it could still help the country make great strides in its monetary policy.
E-Yuan in test run
China already sent the E-Yuan on a test run in April this year. However, implementation was still slow – the first salary payments were made to government officials in the Shenzhen, Suzhou, Chengdu and Xiong’an districts via the payment service provider Alipay.
The E-Yuan, according to government sources, is both traceable and encryptable. In addition, the associated digital wallets should be able to be configured as required, which would make it easier to prevent money laundering.
In order to make the foundation for the e-yuan as stable as possible, the Communist Party immediately called in state-owned banks. The Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and the Bank of China were immediately involved. On the technological side, too, all important players were brought on board from the very beginning. The China Telecom, China Mobile, China Unicom and Huawei jumped right in. In short: The infrastructure for the E-Yuan has been laid.
This month, the test runs were then extended – the DiDi car-sharing agency has announced that it will integrate the E-Yuan. With 550 million users in over 400 cities, China has secured a large potential test field.
The other partners are now following suit. As Finance Magnates reports, the country’s central bank has also entered into a cooperation with the food delivery service Meituan Dianping. The bank also cooperates with the communication service WeChat. The magazine also reports that it is in talks with McDonalds, Starbucks and Subway. E-Yuan as a means of exerting pressure in the economic-political trial of strength
Meanwhile, the e-yuan is said to be attacking the hegemony of the US dollar, according to government circles. Scientists close to the government, for example, announced as recently as May that they intended to introduce a digital central bank currency:
China will soon be the first country in the world to issue a legal digital central bank currency. … In April 2020 the US technology giant Facebook published the non-governmental digital currency Libra. […] The project is a digital equivalent of the US dollar and the global payment strategy of the US government. It is an excellent example of cooperation between the private and public [sector]. But [China’s CBDC] can […] even become the future world currency, challenge the currency sovereignty of countries with incomplete financial market infrastructure [and] further consolidate dollar hegemony […]. Internationalization undoubtedly poses great challenges to national currency sovereignty and China’s payment and clearing system. Yang Dong
In fact, at the moment it looks as if China could win the race for the time being. On the part of the USA there are efforts to create possible plans for the digital dollar. However, these have not yet made any particular progress; the CBDC plans of the United States do not go beyond a private initiative.
- We are a little further along in the local currency area.
- Only last week, the French National Bank announced that it would start test runs for the digital euro.
- The Banque de France is also seeking support from the private sector.
- In addition to heavyweights such as Accenture, HSBC and Société Générale, representatives from the crypto sector are also on board, including LiquidShare and Seba Bank.
E-Yuan: Possible implications
In a country where the surveillance of citizens is sometimes more important than their privacy, the digitisation of financial flows is no accident. The integration of the e-yuan in the mobility sector in particular could, conceivably through geo-tracking of the wallets, also create extensive movement profiles of citizens. An international expansion of the digital central bank currency could also provide the People’s Republic with important information on the movement of money beyond its national borders. Whether and how this information can be obtained, however, remains the subject of speculation at this point.