China rolls out digital yuan wallet to foster further e-CNY adoption

China is actively pursuing its plans to launch a central bank digital currency (CBDC), with the latest development being the launch of a digital yuan wallet. A report unveiled this news on January 4, noting that the People’s Bank of China (PBoC) rolled out the beta version of the wallet to expand the usage of the digital yuan (e-CNY). At the moment, the app is available in Android and iOS versions.

According to the report, the PBoC’s Digital Research Institute developed the wallet. While the application was initially downloadable through private links, this marks the first time it is open to the public. This launch is well-timed, seeing as it comes weeks before the Lunar New Year, where people in mainland China exchange monetary gifts in the form of digital red packets dubbed lai see.

Are you looking for fast-news, hot-tips and market analysis?

Sign-up for the Invezz newsletter, today.

However, new user registrations are limited to designated Chinese cities already trialling e-CNY. These are Shenzhen, Suzhou, Xiongan, Chengdu, Shanghai, Hainan, Changsha, Xian, Qingdao, and Dalian. Apart from these cities, the app will also be open to people at all venues of this year’s Winter Olympics, which kick off on February 4 in Beijing.

Competition is in order

While the Chinese government has achieved significant milestones with its e-CNY initiative, it will face stiff competition from the private sector. Notably, Ant Group’s Alipay and Tencent Holdings’ WeChat Pay let users top up their accounts, transfer money, and make payments with QR codes or NFC like the e-CNY app.

These apps are already popular among the Chinese population. For instance, Alipay had onboarded 1.3 billion users by July 2020. The platform handled transactions worth $1.02 trillion (£0.75 trillion) by the end of June 2020.

According to Mu Changchun, the Head of the Digital Currency Research Institute, around 140 million Chinese citizens had opened a digital yuan account by October 2021. He further disclosed that the CBDC had recorded transactions exceeding 62 $9.7 billion (£7.16 billion) since launch. Compared to Alipay, e-CNY still has a long way to go.

To this end, the government has to find a way to incentivize users to embrace its e-CNY app. So far, the government has been gifting red packets containing digital yuan to attract more users. The largest lotteries were in Beijing, Chengdu, and Changsha when the government gave away 40 million RMB in each trial.

This news comes as the CBDC race continues intensifying, with only two countries managing to roll out digital versions of their currencies. These are the Bahamas and Nigeria.