China expands digital yuan testing to four provinces

Chinese provinces Sichuan, Hebei, Jiangsu and Guangdong will begin testing the digital yuan (e-CNY). The South China Morning Post writes, citing deputy governor Fan Yifei.

The official described the programme as ‘an important infrastructure for the digital era’. He did not specify the timeline for expanding the geographical reach of the trials.

China has been testing the digital yuan for three years. By the end of 2021, the volume of transactions with e-CNY reached 87.57 billion yuan (~$13.68 billion), with 261 million unique digital wallets registered.

Trials were conducted in Shenzhen, Suzhou, Xunyane, Chengdu, Shanghai, Hainan, Changsha, Xi’an, Qingdao, Dalian and the area hosting the Winter Olympic Games. The cited cities will continue to use the instrument.

In April 2022, former PBOC governor Zhou Xiaochuan noted that the e-CNY is primarily intended for the public and merchantsintended for the public and merchants, not to replace SWIFT or ‘turn currency into a weapon’.

The former official added that for cross-border payments the digital yuan could be adapted in the future, but even in this case CBDC would still be oriented toward retail users.

About a year and a half ago, the PBOC and the UAE joined the ‘bridge’ project for national digital currencies, launched by regulators in Hong Kong and Thailand.

In March 2022, U.S. Senator Pat Toomey warned of a threat to US national security from the digital yuan.

Analysts at Deutsche Bank also suggested that the use of the e-CNY in external trade could undermine the dollar’s dominance.

Subsequently, a group of Republican senators introduced a bill in the U.S. Congress that would compel app stores to exclude the use of the digital yuan, as well as any apps with such functionality.

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