Mu Changchun, who heads the Digital Currency Research Institute at the People’s Bank of China (PBoC), provided an update on the roll out and adoption of its central bank digital currency (CBDC) pilot. As of July there were 180 million personal wallets, which represents about one in eight of the 1.4 billion Chinese population. The cumulative transaction volume reached RMB 7.3 trillion. Based on previous reported figures, that means transactions totaled around RMB 300 billion ($42 billion) for the month of July. However, these are not all retail transactions as the digital RMB is also used for high value securities and trade transactions.
Mr Mu emphasized the two-tier nature of the CBDC, with the central bank at the core and commercial banks as the consumer interface. But some of his comments may hint at a potential shift in the balance. The use cases will continue to expand beyond retail to wholesale. However, he also said the application scenarios would include “deposits, loans, foreign exchange, and investment.” It’s one thing if commercial bank deposits at the central bank take the form of digital RMB, but consumer and business deposits are another matter.
Other central banks such as Europe and the UK don’t want to encourage too much migration of bank deposits towards CBDC, worrying that this could affect bank lending. It’s unclear to what extent the Chinese objective is to encourage such a move.
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