China is using the Olympic Games they’re hosting to bring its CBDC, the digital yuan, to a qualitatively new level. The methods of achieving this goal are consistently impressive, although far from always pleasant.
Just ahead of the 2022 Winter Olympics in Beijing, the People’s Bank of China (the country’s central bank) confirmed that it would allow foreign tourists to use the digital yuan (e-CNY) during this grand event. “We will provide quality, efficient and secure payment services for domestic and foreign visitors. Some of them are already available currently: opening accounts, bank cards, mobile transactions, cash and digital yuan”, – the PBC statement said.
And they delivered on their promise – everyone who came to China for the Games was able to download the necessary smartphone app or use a physical card to convert foreign currency into e-CNY tokens. Many shops, cafes, and other outlets in Beijing have been equipped with vending machines that accept digital yuan. It was coupled with commercials launched at the beginning of January promoting e-CNY in Beijing.
As you may recall, the PBC has been gradually ramping up e-CNY trials since the spring of 2021. And while earlier testing was limited to specific regions, from January 4, 2022, the pilot version of the digital yuan wallet app was available to all Chinese users in smartphone app stores.
It took the Chinese authorities nearly no time to move from the limited and voluntary testing model for their CBDC to its total imposition on absolutely everyone. For one, electronic yuan and Visa cards are the only accepted digital means of payment in the region for the entire Olympic Games season. It may seem absurd for people outside of China, but the country actually blocked other payment methods through Alipay and WeChat Pay to promote the digital yuan at the Olympic Games.
Simultaneously, the financial authorities at the Beijing Winter Olympics were handing out e-yuan to both athletes and spectators. The former even received special bracelets that work like electronic wallets and can be used to pay for goods or services.
All convenience stores, cafes, and other outlets in the Olympic Village, where athletes live and spend their free time, are equipped with machines for accepting e-CNY payments – as are railway station shops near the sports venues.
Notably, the banned payment systems – Alipay from Alibaba Group Holding Ltd. and WeChat Pay by Tencent Holdings Ltd. – both support e-CNY. However, they are not in the Olympic Village: it seems that the Chinese authorities decided to play it safe and exclude any surprises (after all, these are private companies, and the project is of too great national importance). So the only payment methods at all Olympic Games venues are yuan – cash and digital – and Visa cards. The latter is easily explained: Visa Inc. sponsors the games.
The Winter Olympic Games gave the People’s Bank of China a major opening to raise awareness of e-CNY among both their own citizens and foreigners. Over the past year, the central bank already made sure that the system works, which meanе that it was time for mass implementation.
The PBC testing of the digital yuan began in April 2020. Initially, it covered four major cities: Shenzhen, Chengdu, Suzhou, and Xiong’an. The program was later expanded to five more cities, including Guangzhou, Hong Kong, and Macau.
A total of 140 million people had signed up for a digital yuan account by early November 2021, officials claimed, although the Chinese still overwhelmingly rely on Alipay and WeChat Pay for their daily transactions. Both apps now support e-CNY payments after Tencent launched e-CNY services on WeChat. Several other internet giants, including JD.com Inc., Trip.com Group Ltd., and Meituan, also accept e-yuan.
However, the PBC is trying to keep a hold of the situation and is tirelessly promoting its digital yuan wallet. According to data collected from app markets of Huawei, Xiaomi, OPPO, Vivo, and other brands, there has been a surge in e-CNY wallet downloads. More than 20 million people have got the central bank app since the beginning of the year alone.
The application allows people to transfer money from bank accounts to an electronic wallet, as well as make or receive payments by scanning a QR code or touching a device with their phone. Previously, consumers could only receive a private e-wallet download link from bank employees when applying to open an account.
The bank also said that the app would be available to foreigners for the first time: “It is our key task and challenge to ensure that foreign guests have a positive experience with the digital yuan. We will seek to provide the best possible service during the Games.”
Of course, the semi-compulsory use of e-CNY settlements by foreigners was a significant advancement. However, for the Chinese society itself, the more important step was the integration of digital yuan in WeChat – a mobile messenger with more than 1 billion users. Its built-in WeChat Pay payment service is used by 800 million Chinese every month.
There is an important national peculiarity at play here: consumers in China are so attached to WeChat Pay and Alipay that it is impossible to make them switch to a new mobile payment application. Consequently, the central bank is partnering with WeChat Pay and Alipay while promoting its own digital wallet more discreetly.
In the coming years, the digital yuan is expected to act as a means of payment in China’s “smart cities”. One such project is already being built near Beijing as part of plans to combat climate change, protect the environment and conserve resources.
What is more, official Beijing sees great benefit in individual foreigners and the country’s trading partners using electronic yuan, as it increases the yuan’s status as a world reserve and settlement currency in the long term.
Americans also clearly realize it. Back in July last year, three Republican US senators called on the US Olympic Committee to ban US athletes from using the digital yuan, citing espionage and data security concerns. It ended up not happening, but the US is obviously still preparing for a global rivalry with China over CBDC.