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China's Digital Yuan

China’s CBDC Faces Hesitancy Among Users, Privacy Concerns Loom

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China’s ambitious venture into the realm of Central Bank Digital Currency (CBDC) is facing hurdles as reports emerge of hesitancy among participants in the pilot program. The state-backed digital yuan, often referred to as e-CNY, is encountering resistance from users who are reluctant to hold onto it, citing various concerns regarding its utility and privacy.

Recent findings indicate that despite efforts to promote the digital yuan, including its adoption as a form of salary payment for state workers in certain cities, many recipients are opting to convert it into physical cash immediately. Sammy Lin, an account manager at a Chinese state bank in Suzhou, exemplifies this sentiment, expressing his preference not to keep funds in the e-CNY app due to the absence of interest and limited spending options.

Similarly, Andrew Wang, a civil servant, acknowledges the digital currency but notes its insignificance in his overall salary. However, his wife, who receives her entire salary in digital yuan, promptly converts it to cash, citing the lack of functionality associated with the e-CNY wallet.

CBDC Privacy Challenges Acknowledged

The reluctance to embrace the digital yuan extends beyond concerns of convenience and financial incentives. Chinese citizens remain apprehensive about the broader implications of transitioning to a cashless society, fearing increased surveillance and the erosion of privacy. Ye Dongyan, a researcher at Beijing’s Cheung Kong Graduate School of Business, emphasizes the need to strike a balance between privacy and security in the implementation of the digital yuan.

Yi Gang, the former governor of the People’s Bank of China, acknowledges the privacy challenges inherent in the CBDC initiative but assures users of “controllable anonymity,” which purportedly safeguards privacy while allowing for traceability in larger transactions.

Despite these assurances, skepticism persists, with participants urging policymakers to address privacy concerns more comprehensively. The journey towards widespread adoption of the digital yuan necessitates not only technological advancements but also robust safeguards to protect user privacy and engender trust in the burgeoning digital financial landscape. As China continues its push towards a cashless future, the resolution of these challenges will be pivotal in shaping the success of its CBDC initiative.

Digital Yuan: Challenger to USD Dominance in $7T Global Finance

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In a rapidly changing financial landscape, the digital yuan is poised to challenge the long-standing dominance of the US dollar in global transactions, thanks to the innovative mBridge project. As the digital prototype gains momentum, experts are scrutinizing the implications of this new platform, which aims to expand the reach of China’s digital yuan and other central bank digital currencies (CBDCs).

The mBridge project, a collaborative effort involving China, Thailand, Hong Kong, and the United Arab Emirates, is on track to unveil a basic working product by the end of the year. Developed in partnership with the Bank for International Settlements (BIS) in Basel, Switzerland, this initiative is driving forward the integration of CBDCs into the global financial system.

The stakes are monumental. The US dollar currently features in a staggering $6.6 trillion of foreign exchange transactions daily, with half of the approximately $32 trillion in global trade invoiced in dollars. mBridge has the potential to facilitate the use of China’s yuan as an alternative to the dollar, particularly in settling large corporate transactions.

Although the mBridge project has been in development since 2017, its accelerating progress has prompted concerns among American and European officials. There are worries that it could grant China a head start in using the digital yuan to transform cross-border payments and potentially sidestep sanctions and regulations.

mBridge: Unveiling the Future of Digital Yuan

Josh Lipsky, director of the Atlantic Council’s GeoEconomics Center, acknowledges the eyebrow-raising developments around mBridge. He notes that while the project raises questions about China’s intentions to reduce reliance on dollar-based settlement systems, it is also a testament to the advanced research taking place at the BIS.

Ross Leckow, deputy head of the BIS Innovation Hub, emphasizes that the project’s current stage is developmental and there’s no set timeline for its operational implementation. However, the potential benefits are clear. The Hong Kong Monetary Authority and the Bank of Thailand share the goal of launching a minimum viable product to improve cross-border payments, aligning with G-20 priorities.

The mBridge project envisions a future where digital currencies powered by blockchain technology streamline international transactions. Its success would represent a notable advancement, potentially reducing cross-border transfer times from days to mere seconds. Despite the concerns raised by critics, the project aims to remove friction in the global financial system rather than fragment it.

As mBridge evolves, it’s becoming increasingly clear that the digital yuan’s emergence challenges the dollar’s status as the world’s primary transactional currency. While the full implications of this paradigm shift remain uncertain, the global financial landscape is undeniably evolving, with new digital currencies like China’s digital yuan at the forefront of this transformation.

Under constant threat, Chinese operators secretly carry out mining activities

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Chinese miners are secretly continuing their underground operations despite the nationwide clampdown on Bitcoin [BTC] mining rigs by the country’s authorities back in May 2021. As per estimates, nearly 20% of miners stayed back during the mass exodus whereby they kept working under the government’s radar through a combination of grid electricity, hydro-power, and internet protocol address manipulation to protect their identities. So how do they do it?

A miner from the Chinese province of Sichuan spoke under the condition of anonymity revealed that he has been working day and night to avoid the authorities’ attention. He along with other crypto miners who have gone underground since the Beijing crackdown earlier this year is adopting unique tactics to evade detection. 

Revealing on his stealth operation, the miner mentioned how he spreads his mining equipment across multiple sites so that no one operation catches the eye on the country’s electrical grid. In addition to that, he also divulged that he goes “behind the meter,” drawing electricity directly from small local power sources that are not connected to the larger grid, such as dams that are less likely to attract government attention. Further, he has taken steps to hide his geographic digital footprint, as well.

Data from a Chinese cybersecurity firm Qihoo 360 shows that crypto mining continues to thrive in the state even after the ban. As per a November report, there are an average of 109,000 active crypto mining IP addresses in China on a daily basis. Most of those addresses are located in the provinces of Guangdong, Jiangsu, Zhejiang, and Shandong.

The reason behind the Chinese crackdown

For one, China is experiencing severe power shortages, a resource vital for bitcoin mining. Secondly, Beijing has also made it clear that crypto mining stands in the way of its aggressive climate targets, as it pushes to achieve carbon neutrality by 2060. Apart from that, the state perceives cryptocurrencies as a threat to its digital yuan. Fred Thiel, CEO of Marathon Digital Holdings and a member of the Bitcoin Mining Council said,

“China’s government is doing everything they can to ensure that bitcoin and other cryptocurrencies disappear from the Chinese financial systems and economy. Part of this is to ensure the adoption of China’s central bank digital currency, and part of this is most probably to ensure financial surveillance activities are able to see all economic activity.”

China’s Digital Yuan Ranks Third in World; Second In Asia In CBDC Race: Report

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China has made significant progress in the development of central bank digital currency [CBDC], becoming the world’s first major economy to pilot a digital currency. Even so, as per a new report, the digital yuan is not the topmost CBDC in the world or in Asia.

According to the latest report by PricewaterhouseCoopers [PwC], China is third when it comes to project maturity, behind the Bahamas with the Sand Dollar and Cambodia, with project Bakong.

The report also mentioned that the digital version of the Bahamian Dollar as well as Cambodia’s DLT-based interbank payment system is either accessible to all the residents via the mobile application, physical payment card, or already is tied up with domestic commercial banks and payment processors. But China is still at the advanced level of trial.

China’s Digital Yuan Might Not Be Able to Tip Dollar’s Supremacy Just Yet

Despite popular notions about Digital Yuan, there are other CBDCs at the global level that require attention. Many market commentators have previously speculated China’s digital yuan to be a huge threat to the dollar. The digitization of China’s yuan has been a thing of global fascination especially in the backdrop of a flourishing cryptocurrency market. With regards to political implications and as well as the new economic levers that digital yuan might generate for the government domestically as well internationally, were also given adequate food for thought.

However, a senior Bank of Japan official recently downplayed the potential for China’s digital yuan to threaten the dollar’s position as the world’s main reserve currency. Kazushige Kamiyama, who happens to be head of the BOJ’s payment systems department and the individual who is tasked with looking into a virtual Japanese currency stated,

“The dollar’s status as the key global currency won’t change so easily. In fact, the dollar’s advantage may strengthen further if the U.S. goes with digitalization.”

Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, also noted that despite China’s massively-hyped digital currency advances, the digitized yuan is yet to prove to be cheaper, more efficient, more private, or more convenient than the existing domestic and international payment systems. While addressing the “threat” to the USD, Chorzempa added,

“[It is] unlikely to represent any more a threat to the dollar’s international dominance than the current forms of RMB, at least over the short and medium-term”

China Stays Ahead In The CBDC Game As Digital Yuan Does In For Testing

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China’s keenness towards digitalization, particularly in the development of Central Bank Digital Currencies [CBDC] has forced all the other countries across the globe to start exploring the same. China undoubtedly has an upper hand in this considering the country’s ever-growing interest and fast-paced development in the same.

While news pertaining to the country releasing the digital yuan for testing had taken over the headlines, all the other countries began speeding up the process. Now, two prominent stores in Shanghai have decided to test the Chinese CBDC.

China Still Ahead In The CBDC Game

Recently, a news portal reported that the New World City and New World Daimaru Department Store in Shanghai along with Taikang Food Store, a food caterer had carried out more than a thousand transactions with regard to the digital yuan, just during the last weekend.

Li Wei, the brand director of Shanghai New World spoke about the same and said,

“We have worked to upgrade the digital payment module ahead of the trial program, and we believe it offered extra stimulus for shoppers on top of the existing sales campaign.”

The latest trial coincided with International Women’s Day which further spruced up the sales. Banks like China Construction Bank and the Bank of Communications joined in to facilitate the latest trial. Users were reportedly provided with virtual coupons for using the digital yuan.

Rewards worth 150 yuan were given to over 2,000 participants by the China Construction Bank and 100 yuan for about 6,500 shoppers by the Bank of Communications.

A shopper surnamed Xu spoke about the latest trial and said,

“The payment procedure takes no more effort than other existing third-party services, and it wouldn’t hurt to try to use the payment method at other places.”

This undoubtedly puts China on a pedestal as all the other countries are still exploring the prospects of rolling out a CBDC.

This E-Commerce Platform Becomes The First To Accept China’s Digital Yuan

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China’s tryst with its own central bank digital currency or the Digital Yuan needs no introduction. In the latest development, the e-commerce company Jingdong, popularly known as JD.com, has become China’s first virtual platform to accept the country’s very own virtual currency called Digital Yuan as a payment mode.

According to the official reports, JD Digits, which happens to be JD.com’s fintech branch, will be accepting digital yuan as payment for some products on its online mall. This will be a part of an experimental giveaway of digital yuan to citizens of Suzhou, a city west of Shanghai.

This news comes as China continues to aggressively gain a greater foothold on consumers spending patterns while simultaneously holding ground of its Yuan as the US dollar experiences weakness. Optimistic sentiment toward the Yuan increased as the Dollar index against a basket of 6 other currencies dropped significantly in the last week of November.

Prior to Suzhou’s move, Shenzhen had launched the country’s first large-scale public trial of the beta version back in October. This experimental giveaway of digital yuan will see 10,000 shops will take part in the trial, including the Chinese e-commerce giant, JD.com.

In addition to that, the city will also be delivering virtual red packets of money to the residents and a total of 100,000 digital red packets, each containing 200 Yuan. These will be distributed to residents by the 11th of December, which will be valid until the 27th of December. As reported by the South China Morning Post, any Chinese citizen living in the eastern city is eligible to register for the lottery through the city’s official public services app, called Suzhoudao.

It all started when China began the launch of its CBDC earlier this year. Following this, several pilot schemes have been taken forward in four Chinese cities. Apart from the big four state-owned banks –namely, the Bank of China, China Construction Bank, Industrial, Commercial Bank of China, and Agricultural Bank of China – that have launched internal testing of the sovereign digital currency, two more state-owned banks, the Bank of Communication and Postal Savings Bank of China, will join the trial in the city soon.

As expected, if the program is scaled up nationwide, China would become the most powerful economy to have a national digital currency.

Chinese Tech Giant Huawei Rolls Out Smartphone That Aids The Digital Yuan

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Unfettered by the abject pandemic, China continues to outsize other countries with regard to the development of the Central Bank digital currency  [CBDC]. As many governments are only getting started on CBDC research and development, China is way ahead in the game.  A recent update from the country revealed the digital yuan’s latest association.

Digital Yuan Finds Shelter At Huawei

Telecommunications equipment company, Huawei is one of China’s biggest assets, the platform revealed its support for the country’s CBDC by rolling out a smartphone that aids the digital yuan. In a recent press conference, the tech giant announced that the Huawei Mate 40 was equipped with a built-in hardware wallet for the digital yuan.

The CEO of the platform for the consumer business wing, Yu Chengdong affirmed that the Huawei Mate 40 was the first of its kind as no other smartphones had enabled support for China’s yet to be launched CBDC.

Furthermore, the Chinese tech giant affirmed and elaborated on the same in a Weibo post. Huawei’s post read,

“The Mate 40 series is the first smartphone that will support digital yuan hardware wallets, featuring hardware-level security, controllable anonymous protection and dual offline transactions – for a novel, safe and convenient payment experience.”

While countries have just begun carrying out research on central bank digital currencies, China seems to be past the testing stage. The Mate40 smartphone was reportedly rolled out to enhance the effectiveness of the Chinese digital yuan on mobile phones. Despite the fact, that this is a huge advancement for the country as well as the tech giant, the smartphone’s ability to convert fiat into a physical-digital yuan wallet is still uncertain.

Huawei’s association with the digital yuan goes way back as the platform was one among the twenty other companies that had aided the development of China’s CBDC. Several other tech platforms had also collaborated with the Chinese government for the development of the CBDC, however, Huawei seems to be the first to roll out a smartphone as such. The Huawei Mate 40 smartphones were undoubtedly a hit as they sold out in 28 seconds in the Asian country.

“China’s CBDC Entails Chances Of Preventing Dollarization,” Former PBoC Governor

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Central Bank Digital Currencies [CBDC] have found its way into the world. With digitalization as a primary goal, governments have been carrying out the development of these assets in full swing. With China’s digital yuan being ready to be out and about, an executive of the Asian central bank revealed several other insights into the digital yuan.

Challenging The Dollar

The supremacy and monopoly that the American dollar has gained over the decades has caused an uproar in the financial sector. Numerous countries striving to bring down America’s hold on the global financial scene, no one has managed to disrupt the country’s supremacy. However, the former governor of China’s central bank, the People’s Bank of China [PBoC], recently proposed that the digital yuan entailed the chances of dethroning the dollar.

Appearing in a recent Eurasia Forum conference, Zhou Xiaochuan pointed out that China had the ability to hinder the dollarization of the economy as it has been addressing and focusing on other topics as opposed to the G7.

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While the G7 aka Group of Seven includes, Germany, Italy, Japan, Canada, UK, France as well as the US, directed their attention at Facebook’s Libra project and other crypto-related issues, China was formulating ways to limit the use of the US dollar as the most common means of exchange.

He further added,

“In China, we’ve been working very hard to push the DCEP that’s the digital currency and the electronic payment. However, the focus and the major point of our concept and the content are different from the G7 principle. We need to prevent dollarization. This is one of the major designing points of the Chinese DCEP.”

Xiaochuan stressed the fact that Asian countries had been working on making the digital yuan suitable for retail payments.

While the launch of Facebook’s crypto project is almost uncertain, China has made itself clear multiple times that it was going to soon release its CBDC, the digital yuan. More recently, the country engaged its citizens in a public giveaway in the city of Shenzen where the population was allowed to make use of the digital yuan for payment purposes. A new law accomodating CBDCs was also in works in the country.

China’s Shenzhen City Concludes Public Giveaway Program Of The Digital Yuan

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China’s progress in the development of a Central Bank Digital Currency [CBDC] has been widely lauded. While countries are still in the research phase of CBDC development, China seems to have wrapped up its testing phase. The country recently announced a public giveaway of about 10 million Digital yuan. The latest report reveals details pertaining to the recent giveaway.

Shenzhen Locks In Huge Numbers In Public Giveaway

With the intention of endorsing the digital yuan, the Shenzhen city of China stepped up and joined hands with the Central Bank of China and launched a pilot program that facilitated the distribution of the digital yuan. A total of 10 million digital yuan worth about $1.5 million was distributed by the Luohu District of Shenzhen city. The latest report by the South China Morning Post revealed that a total of 8.8 million yuan which is worth $1.3 million was spent by the residents of the city.

Residents who received the digital yuan through this giveaway were mandated to spend it from 12 October to 18 October 2020. An online portal was set up for the participants of the giveaway and about 1.9 million residents had applied for the same. A total of 62,788 transactions were made through the 3,389 shops that were assigned for the program.

Elaborating on their latest encounter several residents of the city shared their experience on Weibo. One such Weibo user said,

“There is not much difference compared to WeChat Pay and Alipay when I pay with this [digital currency] app, but I feel the digital currency is more reliable and much safer and I look forward to more features with this app in the future.”

Another user shared that the participants were urged to make use of the “red packet” via text messages before the last date. The user revealed that she spent the 200 yuan that she received at a department store.

Additionally, a total of 901,000 yuan of additional credit was reportedly assigned to the Digital Renminbi application. This application is still not made available to the public.

China Takes A Leap In Development Of CBDC; Shenzhen Rolls Out 10M Digital Yuan Public Giveaway Program

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China’s interest in the development of the Central Bank Digital Currency [CBDC] is witnessed through the progress the country is making in the same. Fearing China’s global take over with regard to financial technology, other countries have stepped up their game and have been probing the prospects of CBDC. However, the latest news from China suggests that the digital yuan would soon be out and about.

Public Giveaway To Endorse The Digital Yuan

Not long ago, China revealed that its CBDC the digital yuan was out for testing in various sectors. The Shenzhen city of China seems to be taking things up a notch by rolling out a pilot program that includes the distribution of the digital yuan. A news portal revealed that the Chinese city had joined forces with the central bank of China in order to organize a public giveaway.

Funded by the Luohu District of Shenzhen, a total of 10 million digital yuan which is worth about  $1.5 million will reportedly be distributed among the residents of the city. The giveaway will include a total of 50,000 individuals and the aforementioned amount would be allocated via a lottery. The intention behind carrying out such a task is to allow the citizens to spend the digital yuan, which is part of the testing program.

An online platform was set up for the giveaway where individuals could register and apply to be a part of the program. The giveaway was scheduled for 9 October 2020 and the winners could commence putting their digital yuan to use from 12 October to 18 October. While the spending of the acquired digital yuan is limited to the Luohu area, about 3,389 shops are reportedly willing to accept the digital RMB.

If the winners of the giveaway restrain from spending the received amount post 16 October, the bank would reportedly take it back.

As China makes headway in the development of its CBDC, other countries are still in the probing stage. Japan recently revealed that it was not looking to launch a CBDC any time soon and would engage in intensive research about the same. South Korea, however, has been trying to catch up with China. The country seeking the attention of the world through its pop culture has also begun the distribution stage of the digital won.