China has released a pilot version of an app that is meant to help users by allowing them to store and pay digital yuan, aka e-CNY, per a report from South China Morning Post. Well, there’s just one issue, though, yuan isn’t really a cryptocurrency, as it was developed by the People’s Bank of China (known as PBOC, as well) as a replacement for banknotes and coins. That means it’s not really a decentralized form of payment, and it doesn’t even operate on a blockchain.
While it may sound like people already pay for things with digital cash when using a credit/debit card or an online payment service, ala PayPal or Apple Pay, the digital yuan isn’t like any of those. What e-CNY is, is essentially physical cash that sees itself converted into a digital form, and has in fact been in the works since back in 2014. Per CNBC, distribution of said digital currency is said to take place using a two-tier system, which will transfer e-CNY from the PBOC to commercial banks. After that, Banks shall distribute the currency to the consumers directly.
Now that it’s been established that yuan isn’t really a decentralized currency unlike the likes of Bitcoin or any other cryptocurrency, it’s also important to note that it doesn’t come with that kind of privacy either. The Deutsche Bank states that it’ll be the one to have “controlled anonymity,” which translates to users having to choose to conceal their identities from counterparties of all sorts, though they shall still let authorities have eyes on transactions for illegal activities such as money laundering.
Payment apps like WeChat and AliPay already have quite the foothold in China. Around 9 in 10 Chinese people say they used either of the 2 apps within the past year. While it might seem difficult to imagine the people switching over to this new payment app, China’s been hard at work promoting it. Within 2 years, Chinese cities have held lotteries which distribute a total of 10 million digital yuan (which would be roughly worth $1.47 million USD at the time) to the people in Shenzen in October 2020, 20 million digital yuan (or about ~$3 million USD) in Suzhou in December 2020, and 40.2 million digital yuan (~$6.2 million) in Chengdu in February of 2021.
Bloomberg covered a trade fair in Beijing in September of 2021, wherein attendees were walked through the process of signing up for an account, and the many ways of using the digital currency. This would include wearables users could use to pay using e-CNY by just tapping against the scanners. As was mentioned in the report, too, users are able to fill up their AliPay account with the currency, which alludes to a possible symbiotic relationship between the two apps, instead of forcing users to make use of one app over the other.
The report further delves into the feature provided by some banks, that enables foreigners to sign up for an e-CNY account, which would require nothing more than their passport and phone number, and convert foreign currency right into e-CNY. The Beijing Winter Olympics of 2022 is getting closer, and this might yet be a way for China to use this currency as leverage, as a way to allow users to make easily make payments.
The new app is available on iPhone and Android app stores in China, though only to people in a select list of cities including, of course, Beijing, Shenzen, Chengdu, and Shanghai. Of course, as astutely pointed out by CNBC, the app is also set to be available during the Olympics.