Annabel Huang recently won a government lottery to test China’s latest economic experiment, the national digital currency.
Huang, 28, after joining the lottery through the social media app WeChat, received a digital envelope in Shenzhen with a digital envelope of 200 Chinese yuan or eCNY, which cost about $ 30. To spend it, he went to a grocery store near his office and bought walnuts and yogurt. He then took a digital currency QR code from within his banking program, which the store scanned for payment.
“Pay travel on how you pay is very similar to other Chinese payment programs,” Huang said of the eCNY experience, although he added that it was not very smooth.
China has made zealous efforts to transform the way government-backed money operates by bringing out its own digital currency with different qualities than cash or digital deposits. The country’s central bank, which began testing eCNY in four cities last year, has recently expanded its testing to larger cities, such as Beijing and Shanghai, according to government submissions.
One of the efforts of the world’s central banks is to try new forms of digital money that can move faster, even access to the most vulnerable people through online financial instruments. Many countries have taken action as cryptocurrencies such as Bitcoin, which has recently depreciated 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 bring more financial control to governments. These currencies can allow for the direct distribution of money, which, if not used by a certain date, will make it easier for governments to repay financial transactions, avoid paying taxes, and pressure dissidents.
Over the past 12 months, more than 60 countries have experimented with national digital currencies, up from 40 last year, according to the Bank for International Settlements. Countries include Sweden, which actually conducts real-life digital religion experiments, and the Bahamas, which has made the digital currency, the Sand Dollar, accessible to all citizens.
In contrast, the United States has been slow to move forward, conducting only basic research. Speaking to the New York Times last week, Treasury Secretary Ethan Yellen said that could change when he said that the US digital currency was “absolutely worth looking into” because “it could lead to faster, safer, cheaper payments.”
But no major power is as far away as China. Its early steps could signal where the rest of the world is heading in digital currencies.
“This is more than just money,” said Yaya Fanusi, a researcher at the Center for Economic and Financial Power and a think tank who authored a recent paper on the Chinese currency. “It’s about data collection, the development of new tools for that data leverage to make China’s economy smarter, based on real-time information.”
Although the Chinese government has not said when it will officially introduce eCNY, several officials have said it will be ready for tourists visiting the 2022 Beijing Olympics. Recent articles and speeches by officials from the People’s People’s Bank of China, the country’s central bank, underscored the program’s ambitions to be the first.
“The right to control the issuance of digital currencies will become a ‘new battleground’ in competition between sovereign states,” the Central Bank said in a September article in China Finance. “China has a lot of advantages and opportunities in issuing fiat digital currencies, so it needs to accelerate to take the first path.”
The People’s People’s Bank of China did not respond to a request for comment.
The development of the national digital currency began in 2014, when the People’s People’s Bank of China set up an internal group to work on, immediately after Bitcoin gained attention in the country. In 2016, the Central Bank established a unit called the Digital Currency Institute. Last year, it began testing eCNY in Shenzhen, Suzhou, Xinjiang and Chengdu, according to Sino Global Capital Finance Investment Company.
Through the lottery of WeChat or other applications, people invited to the trial were able to click on the link և to receive the balance of 200 e-yuan, which was sometimes displayed on their bank account with an image of an ancient Chinese banknote with Mao. Ed Edong’s face. To spend the money, users can scan the retailer’s QR code with the eCNY app or generate a QR code that the retailer can scan.
ECNY’s design takes only a few minor technical elements from Bitcoin և does not use so-called blockchain technology, a booklet-like system on which most cryptocurrencies rely, say officials at the People’s National Bank of China.
Given the unusual nature of the currency, recipients have only a few weeks to spend the digital amount before they disappear. So far, only a handful of retailers have taken the currency. But early users said the experience was so similar to Chinese digital payment options like Alipay և WeChat Pay that it would be difficult to switch to if it spread across the country.
“I’m paying well with eCNY because it’s fast enough և fast,” said Yifan Gao, 30, a Shenzen financial analyst who recently used his 200 eCNY to buy snacks at 7-Eleven :
Gao added that eCNY will become the main one only if people can send it to friends, which was not possible in the experimental version.
Eswar Prasad, former head of the International Monetary Fund’s China division, says one of the most important drivers of eCNY is the success of WeChat Pay և Alipay. Both have created a new alternative financial system that has worried Chinese officials, leading to recent crackdowns on May, Alipaba և Ant Financial founder Jack Ye May.
“ECNY is really a safeguard mechanism to keep the central bank money safe,” Prasad said.
If eCNY succeeds, it will give the central bank new powers, including new monetary policies, to grow the economy. According to one scenario discussed by economists, the central bank can program its digital currency to slowly lose value so that consumers are encouraged to spend it immediately.
Some economists have said that China’s digital currency will also make it easier for the yuan to compete with the US dollar as a world currency, as it can move internationally with fewer obstacles. But Chinese officials and analysts say many other changes will be needed to make that happen.
Beyond these ambitions, eCNY can immediately give the Chinese government more power to control financial flows, as the digital currency system can record every transaction. This raises concerns about privacy, as China has used a number of tools in the past to crack down on dissent.
“If I can not buy you coffee without the knowledge of the government, I’m worried about what that might mean,” Prasad said.
Shuang’s business strategist Huang said he already thought most of his data could be traced back to it.
“I prefer to sacrifice a little privacy for convenience,” he said.