US Debates Digital Dollar as Digital Yuan Transactions Pass $14B
According to data released by the People’s Bank of China last week, Chinese residents had spent more than $14 billion in digital yuan.
According to a press statement from the PBoC, it amounted to 360 million transactions carried out at the roughly 5.6 million businesses in 15 provinces that already accept the central bank digital currency (CBDC), also known as e-CNY or digital renminbi.
Its testing and rollout campaign has been slow, in part to give merchants time to get ready for it and in part to persuade consumers to use it rather than the more well-known and well-used AliPay and WeChat Pay, which together account for more than 90% of China’s digital payments volume. Despite China being far ahead of other major developed countries in developing a CBDC, having started in 2014.
China has taken a number of measures to level the playing field in order to further this goal, most notably pressuring retailers to accept it and enforcing a “scan with one code” law that compelled AliPay and WeChat Pay to accept the e-CNY and develop a system that makes it equally accessible to customers.
Additionally, it has hosted 30 lotteries, giving away millions of dollars in digital yuan in modest quantities to tens of thousands of customers who had to download digital wallets in order to get it. These customers had a very little time to utilise the money or risk losing it.
Additionally, it has made progress in dispelling popular worries that it will be used to meticulously monitor people’s spending.
The PBoC said that the e-CNY took “account of customer privacy protection and security compliance, following the principle of ‘anonymity for small amounts and traceability of large amounts in accordance with the law’” to fully protect the public’s sensible personally identifiable information protection needs.
All levels of government, it continued, have been pushing the CBDC to launch digital renminbi payment services, including ones “for public utility payments, using digital renminbi to issue tax rebate funds, special funds for monthly medical insurance payment, funds for helping people in need, and “specialised, special, and new” enterprise support funds. The inclusion of “county-level rural regions” has been emphasised via the provision of financial services, including the sale of agricultural products and farmer subsidies.
Power Play:
Along with Hong Kong, Thailand, and the United Arab Emirates, China has been experimenting with cross-border payments using the e-CNY. A successful test was conducted under the direction of the Bank for International Settlements (BIS).
Due to its cross-border use, a digital dollar has received some Congressional support. Advocates of the digital dollar contend that a U.S. CBDC is required to keep China from challenging the dollar’s status as the de facto reserve currency of the world.
Rep. Jim Himes (D-Conn.), who recently expressed support, told CoinDesk on October 18 that the United States has to go forward with creating and testing a digital dollar so “we’ve got the option to move forward if we need to.”
Rep. Himes questioned, “Why would you exit the game before you even know what the game is going to look like?” pointing out that it would be extremely simple to back away.
On the other side, Federal Reserve Governor Christopher Waller said in a speech a few days before that it is most likely not necessary to create a digital currency in order to maintain the dominance of the American dollar.
I am not a specialist on national security, Waller said. But the function of the dollar is one area where economics, CBDCs, and national security interact. Advocates for establishing a U.S. CBDC often claim how crucial it will be for the long-term position of the dollar, especially if other significant countries do the same.
He said, “I disagree… I do not believe this has ramifications for the United States’ position in the global economy and financial system.”
He noted that starting a CBDC would have significant dangers, particularly in terms of cybersecurity.
Separately, on October 21, the BIS and Hong Kong Monetary Authority said that a test had shown that CBDCs could coexist alongside private stablecoins while avoiding “over-issuance and double-spending.”
