The Middle Kingdom started its new Digital Yuan or so-called ‘e-RMB’ in four major cities: Shenzhen, Suzhou, Chengdu, and Xiongan, a notable development area just south of Beijing.
The digital currency, the e-RMN being tried out by local businesses and multinational corporations — including international chains like Starbucks and McDonald’s. There’s also more testing planned for the 2022 Winter Olympics in Beijing and Zhangjiakou.
The digital currency is being rolled out to the rest of China, the e-RMB is now starting to be the primary digital currency guided by a large-scale economy.
So what is it, and how much of an influence will it have? E-RM B will pretty much work like cash. Unlike other entirely decentralized digital currencies, it’ll face oversight from China’s bank.
As reported by the state media outlet China Daily, the e-RMB has now been “formally adopted into the monetary system.” In April, Suzhou used e-RMB to pay travel subsidies for half its public sector workers.
Based on a leaked screenshot of the Chinese digital currency app a few weeks back, Abacus reports that it looks a lot like a mix between Alipay and WeChat pay — China’s dominant mobile payment systems. Like on those apps, a unique feature allows users to make e-RMB transfers by bringing two phones close to each other, while other transactions can be completed through the use of QR codes, a system people in China are already well used to.
In a conference with state broadcaster CCTV, Dong Ximiao, a research fellow at China’s National Institution for Finance and Development, explained that users could also swap out the money in their bank accounts for e-RMB, which will be deposited into a separate “electronic wallet.”
Questions remain though, just what kind of effect the e-RMB will have in the Middle Kingdom? Alipay and WeChat Pay, which were both launched around six years ago, account for 90% of China’s 17 trillion USD mobile payments market. In a society where striving to use cash or credit cards can seldom earn you funny looks.
But the indications could be far more significant than everyday consumers may realize.
“Although there is little change from the perspective of user use, from the perspective of central bank supervision, future forms of finance, payment, business and social governance, etc, this is the biggest thing ever”Xu Yuan, Associate Professor at Peking University’s National Development
Research Institute previously told CCTV, according to The Guardian.
The urge for the shift to e-RMB could revolve around China’s global currency market role. With a sovereign digital currency, China would lessen its reliance on the US dollar and what that dollar influences — including sanctions.
Fear of Covid-19 spreading through bills and coins has also pushed many to use cashless payment systems instead. Twenty other countries worldwide are experimenting with their own central bank digital currencies, although none have made it to a trial period yet. Facebook has been a prominent proponent of digital currencies in the US but has faced challenges in launching its Libra system.
The e-RMB has already been rolled out to banks first and then to consumers. How widely it’ll be adopted from there is still subject to speculation.