After joining the lottery through the social media app WeChat, Huang, 28, a business strategist in Shenzhen, received a digital envelope with 200 electronic Chinese yuan, or eCNY, worth around $30. To spend it, she went to a convenience store near her office and picked out some nuts and yogurt. Then she pulled up a QR code for the digital currency from inside her bank app, which the store scanned for payment.
“The journey of how you pay, it’s very similar” to that of other Chinese payments apps, Huang said of the eCNY experience, though she added that it wasn’t quite as smooth. China has charged ahead with a bold effort to remake the way that government-backed money works, rolling out its own digital currency with different qualities than cash or digital deposits. The country’s central bank, which began testing eCNY last year in four cities, recently expanded those trials to bigger cities such as Beijing and Shanghai, according to government presentations.
The effort is one of several by central banks around the world to try new forms of digital money that can move faster and give even the most disadvantaged people access to online financial tools. Many countries have taken action as cryptocurrencies such as Bitcoin, which has recently soared in value, have become more popular.
But while Bitcoin was designed to be decentralised so that no company or government could control it, digital currencies created by central banks give governments more of a financial grip. These currencies can enable direct handouts of money that expire if not used by a particular date and can make it easier for governments to track financial transactions to stamp out tax evasion and crack down on dissidents. Over the last 12 months, more than 60 countries have experimented with national digital currencies, up from just over 40 a year earlier, according to the Bank for International Settlements. The countries include Sweden, which is conducting real-world trials of a digital krona, and the Bahamas, which has made a digital currency, the Sand Dollar, available to all citizens.
In contrast, the United States has moved slowly and done just basic research. At a New York Times event last week, Treasury Secretary Janet L. Yellen indicated that might change when she said an American digital currency was “absolutely worth looking at” because it “could result in faster, safer and cheaper payments.” Yet no major power is as far along as China. Its early moves could signal where the rest of the world goes with digital currencies.
“This is about more than just money,” said Yaya Fanusie, a fellow at the Center on Economic and Financial Power, a think tank, and an author of a recent paper on the Chinese currency. “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.” The eCNY could immediately give the Chinese government more power to monitor finance flows because a digital currency system can record every transaction. That poses privacy concerns, with China having used many tools in the past to crack down on dissidents.
Popper covers finance, technology for NYT
The New York Times