BOFIT Viikkokatsaus / BOFIT Weekly 2021/42

Chinese citizens are now welcome to enrol in experimental use of the digital yuan by signing up on the White List announced by the PBoC in July. According to media reports, over 10 million people joined the pilot programme during the summer. In recent weeks, additional information has dribbled out about new transaction situations where digital cash can be used. These include the purchase of rail, bus and airline tickets, payment of parking fees, hotel services, as well as on-line purchases and vending machines. While the early marketing of digital cash focuses on consumer applications, several business applications have been announced, including an application rolled out China’s largest online retailer JD.com.

Implementation of the technical network that supports circulation of digital yuan has begun. Current plans allow for use of digital cash without having to go online. The money is stored in an electronic wallet on the user’s mobile device or a separate supported device such as a memory card. Digital cash stations are needed to support use of the digital cash. A number of firms have applied in recent months for permits to install digital cash automats that e.g. would allow visitors to the 2022 Beijing Winter Olympics to convert foreign currency into digital yuan. Bank of China, one of China’s largest banks, last month held a demonstration of its latest bank automat supporting digital cash applications.

With the issue of digital money advancing, Chinese officials have cracked down hard on the use of foreign cryptocurrencies. China’s official cryptocurrency policies were tightened in May with the imposition of restrictions on cryptocurrency mining. During the summer, officials arrested thousands of people for money laundering using cryptocurrencies. In September, the PBoC completely banned the use of cryptocurrency and the offering of related services. Although China’s policy crackdown on cryptocurrencies led to a severe global downdraft on cryptocurrency prices (e.g. Bitcoin, Ethereum), prices have since returned to their previous levels. Numerous Chinese cryptocurrency companies have shifted their operations to other countries.


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