As the Beijing Olympics get underway, the Games will feature not just athletic endeavors but an economic event freighted with symbolism. International visitors at the Olympic Village will for the first time get to experience the digital yuan.
The Olympics are part of a slow and steady rollout of China’s central bank digital currency (CBDC). By the end of 2021, the digital yuan had 261 million users, up from just 21 million at the end of June 2021, although its share of the China’s digital payments market is still small, notching about $8 billion in transactions over the past six months.
But what does the rollout of the digital yuan mean for China—and beyond? Despite concerns that the e-CNY threatens the dominance of the U.S. dollar, in fact, China’s efforts to make a digital currency are focused internally—yet might still portend a real transformation in how the country’s economy operates.
It’s no coincidence that, as it advocates for the digital yuan, Beijing has cracked down on the two payment giants, Alipay and WeChat Pay, which currently dominate retail payments in China. This dominance has, in the government’s eyes, reduced competition and innovation in the payment space. Moreover, the government is concerned about these companies’ unwillingness to share their data with them.
In part to curb the growing economic and political power of the e-payment giants, China became one of the first major countries to commence CBDC trials: essentially, just digital versions of the paper currency and coins that central banks issue. China’s trials of the digital yuan started in April 2020 as part of a broader initiative by China’s central bank to improve retail payments. Beijing seems to be implementing a “learning by doing” strategy, conducting small-scale trials before rolling out the initiative nationwide.