China has a plan and the answer may lie in China’s digital yuan.
China’s cryptocurrency has been in development for over eight years, since the People’s Bank of China (PBoC) first began investigating a government-run bitcoin in 2014. In the early 2010s, Chinese crypto miners were first responder and were responsible for an estimated 95 percent of all newly minted bitcoin.
The Chinese government discovered this mining activity in 2012 after investigating the suspicious power usage, as bitcoin mining is extremely energy intensive. A decentralized, anonymous currency posed aa additional major threat to China’s strict social and financial controls.
Officials started banning and regulating cryptocurrency, they also saw its potential. By 2021, all private cryptocurrency activity was banned and the Chinese economy had also largely transitioned away from paper yuan.
Last year, 80 percent of Chinese adults made digital payments. Testing for the digital yuan began in 2020, but the early adoption numbers were less encouraging than Chinese officials may have hoped for.
By October 2021, there were a total of 123 million individual wallets, although the average sum in each was just 47 cents (three RMB) implying that many consumers weren’t actively using the new currency.
Adoption numbers then doubled by January 2022 in the lead-up to the Winter Olympics hosted in Beijing. China planned to use the Olympics to introduce the world to the digital yuan, similar to the country’s extravagant displays in 2008 that thrust a modern China onto the global stage.
Unfortunately, due to China’s stringent covid policies, few foreign visitors were actually in attendance. Still, the PBoC reported around $300,000 (2 million RMB) in daily transactions with the digital yuan throughout the games.
Although dwarfed domestically by China’s primary digital payment companies, AliPay and TenPay, China’s ambitions for the digital yuan are undoubtedly international.
Would you trust a digital yuan? I wouldn’t because of China’s constant meddling with the paper yuan and devaluing it in the past.