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Will China’s Central Bank Digital Currency ever have its Olympic moment?

The Winter Olympics in Beijing were not just a showcase for the world’s best athletes. The event was also an international testing ground for China’s new digital currency – the digital yuan (or e-CNY) – and reinvigorated the interest in its Central Bank Digital Currency (CBDC) plans. Rather than focusing on the functional payment aspects of China’s CBDC, in this analysis we review the key dynamics influencing its adoption.

Over the past year, the race for CBDCs has intensified. There are now 87 countries that are exploring a CBDC in some shape or form. China’s central bank, the People’s Bank of China (PBoC), has been leading the development of a digital currency for quite some time now. In fact, China is poised to further widen the gap, as the PBoC is currently running large-scale pilots in 12 major Chinese cities and regions, plus the digital yuan was presented to the world during the Winter Olympics. In contrast, most countries are still at the research stage with their CBDC, including the USA with the Digital Dollar and Europe with the Digital Euro.

China first began exploring the concept of a sovereign digital currency back in 2014, following the success of mobile payment and digital wallet solutions like WeChat and Alipay. With the first small-scale trials having taken place in May 2020, it has been piloting its digital yuan for almost two years now.

This year, though, China has been stepping up its efforts to create a digital currency. At the beginning of the year, the PBoC released a pilot edition of a mobile wallet application for its digital yuan. More recently, China seized the opportunity to showcase its digital yuan on a global stage and assess its foreign appeal during the Winter Olympics 2022 in Beijing. Throughout the event, international athletes and teams were able to use the digital yuan as one of three available payment methods – besides cash and Visa cards – in and around the Olympic Village.

Even though very few overseas visitors were able to attend the Winter Olympics due to COVID-19 restrictions, which limited the opportunity to test the digital yuan’s foreign appeal on a significant scale, its availability at the event still attracted a lot of international attention. It also triggered some concerns and criticism from the global community related to privacy and domestic competition. Although more than US$300,000 worth of the digital currency was spent daily according to the PBoC, it did not result in the widespread adoption that many were hoping for. This begs the question: which hurdles does China need to overcome to achieve widespread adoption of the digital yuan?

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