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China Doles Out Free Digital Yuan During New Year To Boost Adoption

Digital Yuan
Digital Yuan

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Chinese cities have announced the launch of various digital yuan initiatives worth more than 180 million yuan ($26.6 million) to encourage spending among people. These initiatives include subsidies, consumption coupons, and a lot of other things. China’s currency, the digital yuan, often referred to as e-CNY, has been rising quickly in recent years.

Many local authorities offered vouchers in the form of digital yuan during the inaugural Spring Festival celebrations following China’s optimization of COVID-19 mitigation attempts to boost consumption. Throughout these holidays, the cities of Jinan in the Shandong Province of East China and Lianyungang in the Jiangsu Province of East China both handed digital yuan coupons to various customers.

A Look at Digital Yuan (e-CNY)

Launched in 2022, e-CNY, or digital yuan is a digital currency introduced by the People’s Bank of China (PBOC) for executing retail payments. Large-scale pilot programs were conducted in various cities in China before this digital currency was launched. The aim of the central bank behind introducing this currency was to ensure the dominance of the renminbi in the era of other digital currencies, such as Bitcoin, Ethereum, etc.

Though this currency ensures confidentiality and protection of sensitive personal information, however, it maintains enough records of the transactions for the purpose of tracking illicit activities like tax evasion and money laundering. The country has also launched a digital yuan app for iOS and Android users. The app is available in more than 20 cities, and it allows millions of people to sign up for digital currency through a variety of commercial banks.

The central bank has recently allowed the usage of digital yuan for purchasing securities. China has made greater strides than most of the other nations in building a central bank digital currency (CBDC). The nation initially started using the digital yuan for cash transactions. Additionally, it launched an offline payment feature to its e-CNY payment app. Looking at the current trend, it can be inferred that, globally, nations are moving forward with CBDCs, and the majority of central banks aim to issue a CBDC within the next ten years.

China Launches Various Digital Yuan Initiatives

Customers in China are getting more enthusiastic about virtual currency. Local governments are also making several efforts to boost digital yuan consumption among Chinese customers. They are subsidizing businesses to boost some recovery after the pandemic. For instance, authorities of Shenzhen in South China Guangdong Province distributed more than 100 million yuan in order to subsidize the catering industry. A sum of 4 million digital yuan coupons, each having a face value of 80 yuan, have been given to residents of Hangzhou as of January 16.

A significant number of red packets of digital yuan have also been given to people all around the nation during the one-week Spring Festival vacation, which officially started on January 21 this year, in an attempt to expand the consumer market. Beijing, the capital of the country; Hangzhou, in the eastern province of Zhejiang; and Shenzhen, in the southern province of Guangdong, all have distributed e-CNY coupons. The digital yuan, which is generated by the People’s Bank of China, the nation’s central bank, is regarded as legal tender and is intended to be recognized as M0, or money in circulation, which includes coins and banknotes.

The Rise in the Adoption of Digital Yuan

The usage of digital yuan is currently being studied in 17 provinces in China. About 200 digital yuan initiatives were announced during the festive season across the country, and these initiatives were worth more than 180 million yuan. Business organizations likewise utilized digital yuan to promote consumption. They participated in more diversified operations, such as mobile communications, grocery stores, commuting, tourism, and other businesses.

Digital yuan distributed by the authorities were taken up quickly by Chinese consumers. As per the data from Meituan, a Chinese e-commerce platform that offers life services, digital yuan distributed by the Hangzhou government in East China’s Zhejiang Province was subscribed to by consumers within 9 seconds. Almost 40 million orders for trade in digital yuan were created as a result of the pushing of over 16 million sub-wallets of the digital currency to the Meituan app.

Similarly, the China Construction Bank branch in Tianjin, as a part of the campaign during this spring festival season, is also offering savings of up to 50% to all the customers who make their transactions regarding the movie, shopping, and food through digital yuan. Around the middle of January, Shenzhen delivered two million red digital yuan packets for catering purposes. The value of these packets was around 100 million yuan. Other than that, consumers also had the opportunity of getting coupons ranging from 28 yuan to 666 yuan through the method of the draw of lots. It is important to note that numbers: six and eight are considered to be good luck in Chinese culture.

Senior officials of the ruling party are hopeful that about two trillion-yuan worth of transactions could take place through digital yuan by the end of this year. The goal seems to be challenging at this moment as the total value of e-CNY transactions has only crossed the mark of 100 billion yuan two years after its launch. Prior to the spring festival, the adoption of the digital yuan has been low among Chinese users, which is why the Chinese government has been actively promoting the adoption of the digital yuan among its citizens.

Conclusion

All across the world, the buzz for cryptocurrencies is on a rising trend. Right now, crypto enthusiasts are going crazy after move-to-earn and play-to-earn crypto apps like Fight Out and Meta Masters Guild. Considering this, nations should start developing their CBDC to take advantage of this crypto fever. As far as the low adoption rate of the digital yuan is concerned, it is the best strategy to employ digital yuan promotion activities at the time of Chinese New Year as people are more open to embracing this digital technology at this time.

More than 90 online platforms had adopted digital currency by the end of January, including prominent ones like JD, Taobao, and Meituan, which maintain strong consumption activities. The data on adoption rates during Chinese New Year is undoubtedly positive for policymakers, given that there was an issue with the lack of acceptance of the digital yuan among Chinese consumers before this event.

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