China’s digital yuan central bank digital currency (CBDC) is in the late stages of its pilot as it readies the e-CNY for use in the Beijing Olympics next month. The digital currency will be usable by both locals and visitors to the games. China Daily, an outlet of the Chinese Communist Party, today published an article that again raises the prospect of the digital yuan undermining dollar dominance.
In the last few days, the central bank’s e-CNY digital wallet has launched in the Android and Apple app stores, although it’s only available in pilot regions and users are still whitelisted. Additionally, yesterday Tencent made the digital yuan more widely available in WeChat Pay, the main chat app used in China. Users have to open a WeBank digital renminbi wallet with real name activation. As of the end of October, 140 million wallets had been opened with another 10 million corporate wallets.
Todays’ English language China Daily article states that the “digital yuan also offers the prospect of the Chinese currency becoming a global payment method to rival the dominant US dollar.”
While acknowledging that various other countries are exploring CBDC, it notes that “the U.S. has yet to make up its mind whether it will ever have an e-dollar.”
The piece emphasizes China’s comparative lead, claiming that Harvard economist Kenneth Rogoff has predicted that the United States is at least a decade away from issuing a digital currency (we didn’t independently confirm that claim). Rogoff is on the steering committee of the Group of Thirty working group on digital currencies.
Additionally, the China Daily article quotes a PWC report that ranks the U.S. in 18th position in terms of CBDC innovation, behind the Bahamas, Ecuador and Turkey. It fails to point out that the Bahamas was the first country to launch a retail CBDC and is considered number one on the PwC list, ahead of Cambodia, with China in third spot.
This latest article is one of several stories coming out of China that send mixed messages. Mu Changchun, the leader of the Digital Currency Research Institute, part of China’s central bank, has been keen to emphasize the focus is on domestic applications. However, the central bank is also a participant in the M-CBDC Bridge project for cross border payments with the central banks of Thailand, Hong Kong and the UAE. Mu has emphasized that its CBDC project aims to safeguard monetary sovereignty and also ‘avoid dollarization’.
If Asia’s cross border payments shift to more renminbis and less dollars without displacing local currencies, then both goals could be achieved simultaneously. And it would dent the dollar’s dominance.