China to Feature e-CNY in the Upcoming Beijing Winter Olympics
The deputy governor of the People’s Bank of China, Li Bo, confirmed that foreign visitors and athletes would be able to use China’s digital currency dubbed as the electronic Chinese yuan (e-CNY) during the 2022 Winter Olympics.
China hopes to make e-CNY an international digital currency and a convenient alternative to the regular dollar as a marketing stunt. Unleashing the CBDC during the competitions could also assist the country in maintaining monetary sovereignty as regions such as Beijing, Shanghai, Guangzhou prepare for e-CNY’s extensive use.
The e-CNY test program kicked off in April 2020, extending across ten cities in China. As the Winter Olympics draw near, the digital currency will be the first pilot CBDC to be launched on a vast economy.
As China is geared towards becoming a cashless nation, the PBOC is attempting to weigh in on the user’s privacy protection and the possibilities of implementing a track or trace procedure. In most scenarios, digital currencies employ the anonymity feature, which creates a hub for illegal financial transactions.
Therefore, PBOC seeks to mitigate privacy concerns using the “controllable anonymous” mechanism. Ideally, the controllable anonymous scheme means that monetary bodies will not verify the authenticity of transactions if the transaction amount is smaller and less frequent.
On top of that, digital identities also raise questions since users may encounter identity theft cases, especially when it involves an international setup. Highly cooperative action between central banks, monetary authorities, payment systems, and financial bodies will be necessary to safeguard the traders’ identities.
The Bank of International Settlements provides several solutions that may mitigate the identity concern, the simplest one being the development of a shared interface between payment authorities. By sharing a common platform, the identification system may eliminate third-party engagements leaving it on a national level.
A Look into the Digital Yuan
The Digital Yuan (e-CNY) represents a Central Bank Digital Currency fully backed by Local Chinese Bank Reserves. Established on the Binance Smart Chain, e-CNY plans on replacing the existing cash in circulation to create a cashless world.
It contains an impressive track record working with prominent Chinese entities such as Alipay and WeChat Pay on specific trial programs. The digital currency accounted for approximately $49 trillion in 2020, with four out of five transactions involving e-CNY.
In the future, Chinese financial bodies and authorities are optimistic that e-CNY will be designed with more application scenarios to target a broader consumer market.