China’s central bank digital currency, known as the digital yuan, is witnessing a growing adoption and an increase in use cases. However, it is important to note that despite this expansion, the digital yuan only accounts for a mere 0.16% of China’s overall monetary supply.
The country’s central bank governor, Yi Gang, reported that the digital yuan has facilitated transactions worth nearly $250 billion during the one-and-a-half-year period since its pilot launch. As of the end of June, the total value of transactions reached an impressive 1.8 trillion yuan.
During this time, approximately 950 million transactions were conducted through around 120 million digital yuan wallets, resulting in an average transaction amount of roughly $260.
Despite the significant progress, it is evident that there is still considerable room for growth. By the end of June, only $2.3 billion, equivalent to 16.5 billion digital yuan, was in circulation, accounting for just 0.16% of China’s monetary supply. This data was sourced from a July 19 report by Reuters.
The digital yuan’s adoption is particularly modest when compared to China’s vast population of 1.4 billion. While there have been a few trials in Hong Kong, the primary usage of the digital yuan remains within the domestic retail payments landscape.
In an effort to further enhance cross-border applications, the Bank of China Hong Kong initiated a trial of a cross-border payment scheme for its customers at select retail stores in Hong Kong. This move marks the third cross-border trial of the central bank digital currency in Hong Kong, as reported by the South China Morning Post on July 18.
Lagging Behind: Digital Yuan vs. Public Blockchains
Last year, the BOCHK ran a program encouraging customers to set up BOC e-CNY wallets, rewarding them with $14 (100 yuan) for use at the Hong Kong supermarket chain U Select.
To expand the potential use cases of the digital yuan, the central bank integrated smart contract functionality in January. However, despite these developments, the digital yuan’s value processed in transactions, amounting to $250 billion, represents an impressive 70% increase from the figure cited in August 2022.
Nonetheless, it is essential to recognize that the asset’s transaction value still lags significantly behind that of major public blockchains. For instance, in 2022, Bitcoin alone facilitated transactions worth $8.2 trillion, as reported by various sources.
In conclusion, while the asset’s adoption and use cases continue to grow, there is still a long way to go before it becomes a substantial part of China’s monetary landscape, especially when compared to other cryptocurrencies and traditional payment methods.