Chinese Digital Yuan Usage Needed to be Widened, Says Former PBOC Official

Digital Yuan

Recently a former official of a Chinese financial institution reported to highlight the current situation of the central bank digital currency (CBDC) in the country. He said the ‘digital currency is little used.’

According to Reuters, Chinese financial news outlet Caixin reported Xie Ping, former official at People’s Bank of China (PBOC) attending a conference. The conference held by Tsinghua University was about digital finance. During the event, Ping showcased the disappointment from the result of efforts to bring digital yuan mainstream. The trials across the selected provinces and cities in China are not on par with the expectations and the applications of CBDC should be expanded. 

Countries and financial institutions across the world may have distinct views on cryptocurrencies but the usage of blockchain technology could hardly be denied. This makes most of these international players to leverage the technology to bolster their financial system. 

China being the major player in the field has started early as well as moved relatively faster. Chinese CBDC ‘digital yuan’ or ‘e-RMB’ got the advantage of the country being first and fast mover in the space.

Xie said the overall digital currency in circulation in the past couple of years during its trial phase remained only around 100 billion yuan, equivalent to 14 billion USD. The figure indicates the low usage and inactivity of the currency in the region. 

While explaining the potential solution for this issue, the former central bank official stated that digital yuan needed to get out of the perception of being a mere alternative for using cash in the region used for consumption only. 

Xie noted, “Cash, bank cards and China’s third-party payment mechanisms have formed a payment market structure that has met needs for daily consumption.”

According to him, the business of digital yuan had no synergistic impact and provided no commercial advantages to banks. In the meantime, third-party payment systems, like Alipay from Alibaba Group (9988.HK), offered a more enticing selection of features, including investing, insurance, and consumer financing.

The use of the digital yuan might be increased to remedy the issue, such as by allowing people to purchase financial items with it, suggested Xie. Additionally, it might be linked to new payment platforms to enter more consumption scenarios.