China has quickly adapted to the increasing use of digital currency throughout 2021 which saw surges in value from the likes Bitcoin, Dogecoin and HUH Token. As societies become more digitized, partially due to the pandemic, governments began piloting their own central bank digital currencies (CBDCs) to get in on the trend. But China has been testing out its digital yuan in various cities since October 2019 – and data from the Financial Associated Press just revealed that there has been a spike in downloads over the past 10 days, amounting the total figure to over 20 million downloads.
The app is only accessible to individuals physically located in the “10+1” pilot locations, which is restricted in other regions of the country. However, some of the most prosperous cities in the country are included in the pilot, including commerce and innovation hubs. The “+1” denotes the areas that will host the Winter Olympic Games next month.
Shenzhen is one of the cities, according to the Shanghai Securities News, and has already set up a significant amount of commercial infrastructure that is compatible with the digital CNY. More than 300,000 retailers in the city allegedly receive e-CNY payments.
Apparently, service industry enterprises account for over 37% of this number, however adoption has also been strong among merchants, catering services, transportation providers, education, and medical care. Shanghai has stated that it will “actively push the construction” of its “legal digital currency innovation pilot zone” and would make a “contribution to digital yuan research and development.”
Aside from China, the Bahamas, Marshall Islands, Sweden, and the EU are allegedly in the developmental stage of adding digital currencies to their economies. Despite uptake among Chinese citizens being impressive so far, what kind of appeal do CBDCs offer over crypto and cash?
Firstly, unbanked populations have struggled to adapt to the newly digitized economy, and risk further exclusion as crypto gains more momentum. CBDCs have been proposed as one solution to this problem – with retail CBDCs, consumers can gain direct access to central bank funds. Moreover, CBDC transactions are generally faster, cheaper, and securer. Likewise, if the central bank is stable, people’s money is safe – there isn’t a risk of collapse as with commercial banks. Also, because CBDC transactions are recorded on a digital ledger, money is significantly more traceable. This could help authorities detect illegal activities. The People’s Bank of China claimed that one of its motives for the e-CNY was that money laundering, gambling, corruption, and terror financing could all be reduced, and financial transactions made more efficient.
On the other hand, crypto, which snowballed due to its decentralized nature, could be replaced by CBDCs. Central banks would be granted complete control over its CBDC, which crypto removes to give people more autonomy over their finances. Furthermore, every transaction would be tracked by the central bank. Whenever a huge firm has so much user data, the risk of privacy violation is probable (think the Facebook – Cambridge Analytica scandal). According to the Wall Street Journal, the digital yuan provides the Chinese government with a new tool to monitor its citizens and transactions, despite the PBOC insisting to limit tracing.
Either way, January has already been rough for crypto. Many have been tanking, and Bitcoin took longer than expected to pick back up. Dogecoin saw a brief spike following Elon Musk’s announcement that Tesla would be accepting merch in DOGE. Similarly, Cardano has soared 7%, which can be attributed to its metaverse project, Pavia.
HUH Token is reaching its all-time low after surging in value by 6000% within weeks of its December launch on PancakeSwap. Nevertheless, HUH is predicted to explode again when social media influencers begin promoting the uti-meme next week. In response to its present nadir, HUH announced yesterday on Twitter that tokens have a reduced tax of 2% if bought or sold on UniSwap now. The offer comes only weeks after an Instagram competition that awarded $60,000 worth of HUH tokens to 60 random winners. One thing for sure is that CBDCs certainly won’t be giving the same kind of prizes and opportunities that crypto does!