![]() In one possibility that economists have discussed, a central bank could program its digital currency to slowly lose value so that consumers are encouraged to spend it immediately. If the eCNY is successful, it will give the central bank new powers, including novel types of monetary policy to help the economy grow. “The eCNY is really a defensive mechanism to keep central bank money relevant,” Mr. ![]() Both have given rise to a new alternate financial system that has worried Chinese officials and led to a recent crackdown on Jack Ma, the founder of Alibaba and Ant Financial, which owns Alipay. Gao added that the eCNY would become mainstream only if people could send it to friends, which was not possible with the trial version.Įswar Prasad, the former head of the International Monetary Fund’s China division, said one of the most important factors driving the eCNY was the success of WeChat Pay and Alipay. “I’m totally fine to pay with the eCNY, since it’s smooth and fast enough,” said Yifan Gao, 30, a financial analyst in Shenzen, who recently used her 200 eCNY to buy snacks at a 7-Eleven. But early users said the experience was so similar to Chinese digital payment options like Alipay and WeChat Pay that it would not be hard to switch to it if it rolled out nationwide. So far, only a limited number of retailers have taken the currency. In a hint of the currency’s unusual nature, recipients have only a few weeks to spend the digital money before it disappears. To spend the money, users can use an eCNY app to scan a retailer’s QR code or produce a QR code that the retailer can scan. People invited to the trial through a lottery on WeChat or other apps were able to click on a link and get a balance of 200 electronic yuan, which was sometimes displayed in their bank app over a picture of an old-fashioned Chinese bank note with Mao Zedong’s face. Last year, it began trials of eCNY in the cities of Shenzhen, Suzhou, Xiongan and Chengdu, according to research from Sino Global Capital, a financial investment firm. In 2016, the central bank created a division called the Digital Currency Institute. The development of a national digital currency began in 2014, when the People’s Bank of China set up an internal group to work on one, shortly after Bitcoin gained attention in the country. The People’s Bank of China did not respond to a request for comment. ![]() “China has many advantages and opportunities in issuing fiat digital currencies, so it should accelerate to seize the first track.” “The right to issue and control digital currencies will become a ‘new battlefield’ of competition between sovereign states,” read an article in China Finance, the magazine of the central bank, in September. Recent articles and speeches from officials at the People’s Bank of China, which is the country’s central bank, underscored the project’s ambitions and the desire to be first. While the Chinese government has not said if and when it will officially introduce the eCNY nationwide, several officials have mentioned having it ready for tourists visiting for the 2022 Olympics in Beijing. “It’s about developing new tools to collect data and leverage that data so that the Chinese economy is more intelligent and based on real-time information.” “This is about more than just money,” said Yaya Fanusie, a fellow at the Center for a New American Security, a think tank, and an author of a recent paper on the Chinese currency. Its early moves could signal where the rest of the world goes with digital currencies. Yet no major power is as far along as China.
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