As countries experiment with central bank digital currencies (CBDCs), China is the only large economy with an actively deployed CBDC: the digital yuan, or e-CNY.
China’s central bank recently announced that the e-CNY will no longer be limited to Chinese people or domestic businesses but can be used by foreigners in China, particularly at the upcoming Beijing Winter Olympics.
China will also explore the applicability of the e-CNY in cross-border transactions, so it may spread globally.
Non-Chinese individuals and businesses need to decide what role, if any, the digital yuan will play for them. As China and other governments across the world adopt CBDCs, individuals should demand transparency on how they work, technically and legally.
First, what’s the point? How is a CBDC different or more valuable than existing forms of money (much of which is already digital anyway)? Is it all that different from money in a current account or payment platform?
CBDCs, like cash, are direct central bank liabilities, rather than commercial bank liabilities. Central banks can always print money so they would not fail in the same way a commercial bank or payment platform could. So CBDCs might arguably be a safer form of payment and currency.