China is pushing aggressively to be a global leader in financial technology. Over the past several years, use of mobile payment platforms has exploded in China while cash transactions have declined.
The People’s Bank of China is reportedly aiming to release the e-yuan before the start of the Winter Olympics in 2022 in Beijing.
China’s e-yuan will allow closer scrutiny of risky investments and help ensure repayment of debt, says Guo Weimin, chief scientist at the Bank of China. In next phase of development, digital currency will be expanded to cross-border transactions using Hong Kong as a conduit, according to a report in the South China Morning Report.
Economic challenges caused by the Covid-19 pandemic have increased the urgency for Chinese companies to adopt the use of a digital currency, the paper said. To date, pilot programs have rolled out in the Chinese cities of Shenzhen, Suzhou, Xiongan and Chengdu, and the list is growing.
Guo is reported to have said that the key advantage of the e-yuan system is its ability to trace cash flow and make it easier to enforce financial regulations.
In a recent report released by the Center for a New American Security (CNAS), it was suggested that the central bank's digital currency is being designed to allow for surveillance of all financial transactions throughout its society. CNAS reported:
“This CBDC (central bank digital currencies) system, which the Chinese government calls Digital Currency/Electronic Payment (DCEP), will likely enable the Chinese Communist Party to strengthen its digital authoritarianism domestically and export its influence and standard-setting abroad. By eliminating some of the previous constraints on government data collection of private citizens’ transactions, DCEP represents a significant risk to the long-held standards of financial privacy upheld in free societies.”
Noted: Central bank digital currencies, like China’s e-yuan, are unlike cryptocurrencies such as bitcoin or the Facebook-backed digital coin Libra. That’s because they are controlled and issued by a central bank. Bitcoin, which recently hit a record-high price, is decentralized – that means it’s not controlled or issued by a single entity.
