- Those digital yuan wallets with the highest levels of privileges and requiring no transaction cap would need to be opened with a bank with personal identification.
- Over 140 million Chinese have created digital yuan accounts, or roughly a tenth of the entire population.
According to the Chinese central bank, the People’s Bank of China, over 140 million Chinese have created digital yuan accounts, or roughly a tenth of the entire population.
More significantly, transactions in e-CNY, as the central bank digital currency is officially know, reached a sizeable US$9.7 billion in trials rolled out in just a dozen regions, according to Mu Changchun, head of the PBoC’s Digital Currency Institute, in comments made at the Hong Kon Fintech Week yesterday.
With over 80% off central banks globally either issuing their own digital currency or actively studying the case for one, according to the Bank of International Settlements, the Chinese experience could be instructive.
One of the major concerns from other central banks is that directly issuing currency to citizenry could undermine the role that commercial banks play in the financial system, especially during periods of financial stress, when individuals and companies may find it “safer” to deposit their digital currency directly with the central bank.
Issues over the appropriateness of central bankers determining who should gain access to loans and how much, as well as administration of other commercial bank functions raised the prospect of moral hazard and increased the potential for corruption, which have all been factors slowing down the development of central bank digital currencies for other countries.
China however has less of an issue as almost all banks are state-owned.
In comments at the Hong Kong Fintech Week conference, the PBoC’s Mu revealed that digital yuan operators can open four types of e-wallets for customers, with those having the lowest transaction limits capped at around US$782, with an annual cap of around US$7,820 only needing a phone number, ensuring some anonymity, even from the PBoC itself.
Those digital yuan wallets with the highest levels of privileges and requiring no transaction cap would need to be opened with a bank with personal identification.
Mu stressed that these digital yuan wallets would collect far less transaction information than digital payment services that most Chinese have found indispensable, such as Alipay and WeChat Pay and assured that the PBoC would not provide the information to any third party or other government agencies unless required by law.
