In the realm of central bank digital currencies (CBDC), a compelling narrative is unfolding in China. With approximately $250 billion in transactions made since the initial pilot, it’s revealed that their CBDC, popularly known as the digital yuan or e-CNY, continues making sizable strides. This was announced by Yi Gang, the governor of the People’s Bank of China, during a conference in Singapore.
However, a necessary skepticism must be adopted, as this sizable transaction volume accounts for a mere 0.16% of China’s total monetary supply. This still outlines the immense unexplored potential of the digital currency. Up until now, its usage is dominated by domestic retail payments with little exploratory steps in cross-border payment trials, as reported by the South China Morning Post (SCMP).
Cautious optimism is suggested as China advances the use cases of e-CNY by integrating smart contract functionality. This leads to the expansion of the potential surface area of application for the digital yuan. Despite this substantial increase in adoption since August 2022, a stark contrast is evident when placed alongside some of the biggest public blockchains, such as Bitcoin processed $8.2 trillion in transactions in just 2022.
Although we’re witnessing an astounding growth in transactions using China’s digital yuan, the limitation is quite evident. This raises the question; why has the bulk been domestic retail payments primarily? Is it due to the embryonic stage of the digital yuan or the resistance to cross-border payment channels using this digital currency? Or could it perhaps be related to an underlying governmental strategy to cautiously manage the outflow of capital?
It appears, nonetheless, that China continues to slowly yet consistently move towards expanding the applications of the digital yuan. This includes an exploratory step towards cross-border transactions with trials occurring in Hong Kong. Furthermore, the digital yuan may soon prove to be a robust and integrated system that enables and promotes cross-border commerce.
However, again, it is crucial to remember the infancy stage of the digital yuan and the fact that it represents a small fraction of China’s total monetary supply. Where it goes from here largely depends on how well the government and monetary authorities manage its growth and integration into not just domestic, but also global commerce.
Source: Cointelegraph
