CBDC Activity Subsidizes Consumption During Lunar New Year

Over the course of the Lunar New Year holiday, the Chinese central bank distributed an amount of its digital currency (CBDC) worth millions of dollars around the nation in an effort to encourage more people to use it.

A story that was published on February 6 in the Global Times, an English-language subsidiary of the state-run newspaper People’s Daily, said that over the Christmas season, about 200 “events” for the e-CNY were launched across the nation.

The government attempted to “encourage consumption” through these events, which marked the first time it had done so since the COVID-19 limitations had been recently loosened.

According to reports, many localities together dispersed CBDC worth more than 180 million yuan ($26.5 million) via various schemes including subsidies and consumption coupons.

According to one example provided by the source, the local government in Shenzhen distributed e-CNY worth more than 100 million yuan ($14.7 million), which was done in order to aid the catering business in the city.

According to a story published in China Daily on February 1st, the city of Hangzhou gave each citizen an e-CNY certificate worth 80 yuan (about $12). The entire cost of the gift to the city was close to 4 million yuan, which is equivalent to $590,000.

It turned out that a number of these projects were quite well received by the locals.

According to a story published by the Global Times, which cited information obtained from the e-commerce site Meituan, the e-CNY that the municipal government of Hangzhou distributed to its citizens as part of the New Year’s festivities were used up in only nine seconds.

Over the course of the last several months, the government has implemented a number of additional goals and features designed to increase the number of people using the CBDC.

On February 1st, top governing party leaders in the city of Suzhou established a provisional key performance indicator by the end of 2023 of having 2 trillion yuan worth of e-CNY transactions in the city. This equates to around $300 billion in current U.S. dollars.

The objective is lofty taking into consideration that the total value of all e-CNY transactions has barely surpassed 100 billion yuan ($14 billion) as of October, two years after the introduction of the CBDC.

The e-CNY wallet software added the capability to send “red packets,” also known as hongbao in China, in late December of the previous year in an effort to entice new users. These “red packets” include money and are traditionally given as gifts during the holiday season.

An upgrade was released for the wallet app at the beginning of January, enabling users to make contactless payments using their Android phones. These payments may be made even if the user’s device is not connected to the internet or has power.

During the month of December, a former official from the Chinese central bank said that the outcomes of the e-CNY experiments were “not ideal,” and that “use has been minimal, very inactive.”


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Local Officials Set Ambitious Targets for Digital Yuan Transactions

Local news site JS China reports that top Communist Party officials were present in the City of Suzhou on February 1 for an annual conference discussing the testing of the digital yuan central bank digital currency (e-CNY CBDC). As part of the outcomes of the meeting, party officials have established a provisional key performance indicator (KPI) of 2 trillion CNY ($300 billion) for e-CNY CBDC transactions in the city by the end of 2023. This KPI is intended to be implemented by municipal administrators through promotional efforts.

A goal of processing $30 billion in e-CNY loans for small and medium-sized firms in Suzhou by the end of the year has been established by the relevant authorities. With over 30.54 million digital wallet downloads in 2022, the total value of e-CNY transactions in the city topped 340 billion CNY, which is equivalent to $50.5 billion. These transactions took place at 930,000 local companies and government agencies. The total amount of financial incentives connected to the e-CNY amounted to 40 billion CNY ($5.9 billion), while the total amount of e-CNY loans granted was 18.7 billion ($2.78 billion).

Concurrently with the e-CNY Key Performance Indicators, the local administrators in Suzhou are required to oversee the development of at least 1,000 firms in the digital financial technology sector within the city by the year 2025. These firms are required to specialise in the areas of artificial intelligence, data, cloud computing, blockchain, and machine learning. Currently, there are only 371 such firms. An excerpt from the plan for the City of Suzhou reads, when translated: “By the year 2025, the People’s Bank of China will have established a digital assets data monitoring platform, a blockchain-powered exchange for finance and commodities, a payment solution for internet of things, and a fintech lab, all of which will have produced tangible results. This would encourage the growth of the ecosystem for digital finance, which would synergize nicely with the current financial industry in the City of Suzhou.”


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China’s Central Bank Digital Currency (CBDC)

Improvements have been implemented into China’s Central Bank Digital Currency (CBDC), often known as the digital yuan or eCNY. These upgrades have given the digital yuan the ability to participate in smart contracts, and they have also introduced a number of new use cases.

According to a story published on January 17 by a local cryptocurrency media site called 8btc, the smart contract capability was released on the Meituan app, which is a Chinese app that offers retail and food delivery services.

When a user of Meituan places an order and pays for it with their e-CNY wallet, a smart contract is triggered, and the contract examines the order for certain keywords and things that were bought.

If a user purchases an item that is included in the list of keywords for the day, they will be entered into a drawing for a chance to win a portion of a reward.

The award consists of a portion of a “red envelope,” also known as an hongbao in the area, which contains 8,888 yuan, which is equivalent to little more than $1,300.

Hongbao are wallet-sized packages that have long been used as an auspicious way to present monetary presents during the Chinese New Year celebration.

In an effort to encourage more people to use the e-CNY wallet app before the Chinese New Year begins on January 22, the developers included a function in December of the previous year that enables users to send digital red envelopes to one another.

In conjunction with the most recent advancement, new applications for the e-CNY have also been developed during the course of the last several days.

According to a story that was published in the China Shares Journal on January 16, e-CNY was utilised for the very first time to purchase securities.

In addition, investors are able to purchase assets via the CBDC by using the mobile app for Soochow Securities, which is a local brokerage business.

According to a report published on January 11 by Yicai Global, the digital yuan wallet software has gotten an upgrade that enables users to conduct contactless payments using their Android phones even when their device does not have access to the internet or electricity.

The new applications for the digital yuan come at a time when China is having difficulty increasing the usage of its central bank digital currency (CBDC).

In December 2022, a former official from the People’s Bank of China (PBOC), the country’s central bank, made a rare public admission saying that the digital yuan’s “usage has been low” and “highly inactive,” and added that “the results are not ideal.” This admission was made by saying that the digital yuan’s “usage has been low” and “highly inactive.”

On January 10, the People’s Bank of China (PBOC) for the first time included e-CNY in currency circulation data, which revealed that the CBDC constituted around 0.13% of the 10.47 trillion yuan ($1.54 trillion) in circulation at the end of 2022.


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Ex-Chinese Central Banker Says Digital Yuan: Use Has Been Minimal


An ex-official of the People’s Bank of China (PBOC), which is the central bank of China, has stated his dissatisfaction with the fact that China’s digital yuan is not being used very often.

According to a report published on December 28 by Caixin, Xie Ping, a former research director at the PBOC who is now a finance professor at Tsinghua University, made critical public comments about China’s central bank digital currency (CBDC) at a recent university conference. Xie Ping’s comments were made public during the conference.

Xie pointed out that the total value of all transactions conducted with digital yuan had just surpassed $14 billion (100 billion yuan) in October, two years after the debut of the currency. ” The results are not what I would have hoped for,” he stated, adding that “use has been minimal and very inactive.” In spite of the quick extension of the trials by the government and the introduction of additional wallet features in an effort to entice users, the People’s Bank of China said in January that only 261 million people have set up an e-CNY wallet.

According to a research published by China UnionPay in 2021, this number is much lower than the estimated 903.6 million individuals that use mobile payments in China.

The former official from the central bank stated that the use case of e-CNY “needs to be changed” from its current use as a cash substitute and that it should be opened to other uses such as the ability to pay for financial products or connected to more payment platforms in order to increase adoption.

He made the comparison by stating, “He likened the digital yuan to other third-party payment systems in the nation such as WeChat Pay, Alipay, and QQ Wallet, which allow for investments, lending, or borrowing.

Although there are some third-party financial applications that are compatible with e-CNY, they do not see much usage because, as Xie said, “people are habituated to” using the original service and “changing is tough.”

This level of criticism of Chinese government efforts coming from former officials is quite unusual, and it suggests that the nation may be having significant difficulty gaining momentum on its CBDC project.

The administration has moved quickly to extend e-CNY trails to a total of four additional cities, the most recent of which was in December.

It was decided to add new features to the e-CNY wallet app in the hopes of attracting users in time for the Chinese New Year. One of these new features is the capability to send digital versions of traditional red packets or red envelopes (hongbao) containing money. This is a common custom that is observed during celebrations.


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Chinese Court Reaffirms Stablecoins are Not Legal Tender

It is already about a year since China banned transactions involving digital currency transactions, and a Chaoyang Court in Beijing has further reiterated that cryptocurrencies are not a legal tender in the country.


The court ruled on a dispute involving a senior employee and two shareholders of a network technology company regarding the payment of wages in Tether (USDT) stablecoin.

As reported by the Beijing Daily, the dispute involved Shen, who wanted to receive his funds in Renminbi after serving the firm. Hu and Deng, both of whom were the defendants, considering the business was closed up after Shen’s service. While Hu and Deng posited that they were not indebted to Shen as they have paid all requested arrears and benefits.

The prosecutors’ investigation found that the funds were paid in USDT, a stablecoin issued by Tether Holdings Ltd.

Considering the previous designation of the Renminbi and not crypto as legal tender by the People’s Bank of China (PBoC) as well as other key stakeholders, the Chaoyang Court thus ruled in favour of Shen and ordered all entitlements to be paid in the form of the Renminbi. The due fund is worth 270,000 Yuan.

Receiving funds in USDT may be worthless at this time as every legal financial service provider is complying with the PBoC’s directive to ban transactions involving digital currencies. To avoid coming into the authorities’ crosshairs, the top cryptocurrency exchanges, including Huobi and Binance all moved out of China when the crypto ban came into effect.

The PBoC is also at the later stage of its Central Bank Digital Currency (CBDC) or Digital Yuan pilot testing as it seeks to provide alternatives to private cryptocurrencies while still maintaining a touch of today’s current financial innovation.

Image source: Shutterstock


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US lawmakers issue warnings about digital yuan as Winter Olympics kicks off

With the opening ceremony of the Beijing 2022 Winter Olympics completed and all competing athletes currently in China, two members of Congress are warning of the potential dangers of using digital yuan at the events.

According to a Friday report from Reuters, Pennsylvania Senator Pat Toomey sent a letter to Secretary of State Antony Blinken and Treasury Secretary Janet Yellen on Feb. 3 expressing concern that the Chinese government could use the games to promote greater adoption of its central bank digital currency, the digital yuan. The country has been conducting trials of the CBDC since April 2020, later announcing foreign athletes and visitors would have the opportunity to use it during their time at the Olympic Games.

Toomey claimed that the digital yuan rollout among an international crowd could help set a standard in cross-border payments, potentially threatening U.S. interests. The Federal Reserve has floated the idea of releasing a digital dollar, but has not reached a decision to do so. The Pennsylvania Senator reportedly asked the State and Treasury Departments to report on the number of foreign visitors using China’s digital yuan to determine if the Olympics rollout could provide any useful information for U.S. officials considering a CBDC.

“The importance of remaining a leader in the global digital economy and supporting new innovations like digital currencies is a significant domain of strategic competition with other countries, including China,” said Toomey.

Many U.S. lawmakers are offering their support for those competing at the games, with some including Minnesota Representative Tom Emmer offering a last-minute warning to athletes not to use digital yuan while in China. Emmer has previously referred to China as living under “digital authoritarianism” in proposing legislation to limit the Fed’s ability to issue a CBDC.

In July, a group of three senators sent a letter to the U.S. Olympic and Paralympic Committee claiming that the Chinese Communist Party could use the CBDC to surveil visiting athletes both while at the games and upon their return to the United States. The committee reportedly suggested members of Team USA leave their smartphones at home and only use “burner” phones while in China, given the former could be infected with “malicious software.” At the time of publication, the Team USA Instagram page continues to post its own stories and share those from participating athletes’ accounts.

Related: COVID restrictions stymie digital yuan rollout at Beijing Winter Olympics

The Beijing 2022 Winter Olympics is the first major testing ground for the country’s CBDC among a broad group of international visitors. Since its launch almost two years ago, transactions using the digital yuan have totaled more than $13 billion, with roughly 10 million merchants activating digital wallets for the CBDC by November 2021.