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China has announced a wide adoption of digital Yuan currency by public sector workers as a means of payment in eastern region cities. This development is estimated to be the catalyst for the biggest rollout of the currency.
China Permeating Digitalization: The Rise of e-CNY Fiat
As detailed in an official document published on China’s government websites, Changshu, a city in the province of Jiangsu, is set to accept the digital Yuan, also known as e-CNY, as a new payment option in May.
According to the state media, mitigating the use of physical fiat is a necessary step to fully embody digitalization in all sectors, which will facilitate growth in all function sectors it relies on.
Since its debut on August 14, 2020, the rise of e-CNY potential use cases has grown exponentially as it continues to create a digital version that meets public demand for cash in the current digital economy era.
The e-CNY system will support the optimal development of several retail payment infrastructures and improve the swift payment system by offering an efficient gateway in parallel with the digital economy dream of China.
The advent of this development will enable Government employees and staff in state-owned and public institutions like schools, libraries, hospitals, media organizations, and research institutes to adopt the new digital currency.
Similar to a cryptocurrency asset, the digital Yuan (e-CNY) is integrated into some element of blockchain technology to further secure and record every transaction on a digital ledger, as this will help trace suspicious activities in case of an impromptu event or investigation of the theft.
The city of Changshu is currently the early adopter of the digital currency vision and potential goals. Over 1.7 million residents of Changshu trust and accept payments online via the currency as it is managed and backed by the People’s Bank of China (PBC), the country’s central bank.
Since last year October, Changshu residents have been paying utilities such as transit fees via the digital Yuan.
A New Fueled Competition for World’s Largest Economy
Currently ranked as the second-largest economy in capital and overall revenue, China’s digital currency might just be a much-needed fuel that surges its economy to greater heights.
Launched in 2020, the digital Yuan has been on trial and rolled out to diverse cities as it aims to develop and compete with the United States on a global scale to become the world’s largest economy.
The e-CNY currency will enable China to develop a state-backed digital currency, also known as central bank digital currency (CBDC).
Although now active in the city of Changshu, the timeline for a national rollout is yet to be announced, even though many marketing strategies have since been employed in Beijing, the capital of China.
Beijing, Shenzhen, and several Chinese cities have previously shared millions of e-CNY with their residents outrightly to motivate them to use the virtual currency.
These cities have also asked privately-owned electronic transaction applications to promote the digital Yuan actively. Some of these apps include Alipay and Tencent.
Alipay trialed the virtual currency as a payment option in 2021, followed by Tencent in 2022 after it announced it would support e-CNY on its WeChat Pay Wallet.
However, despite a series of trialed marketing strategies, there are fears that digital currency might not hold water.
According to China’s central bank data report, e-CNY transactions have struggled to gain traction, leveraging just 100 billion Yuan ($14.5B) by the end of last August, equivalent to an average of 3.6 billion Yuan since its debut.
While some financial enthusiasts and analysts believe there are signs of early progress, it remains obvious that China’s government would need to do more to compete with privately-owned digital payment brands.
Alipay 2020 stock exchange reports state that it processed an average of $1.6 trillion monthly, a thousand times higher than the e-CNY transaction volume at the time.
With the deployment of more proven marketing strategies and optimal enthusiasm by China’s government, the digital Yuan embeds the required potential to propel China’s economy to greater heights.
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