What is China's digital currency, the e-CNY?

China’s e-CNY is a central bank digital currency that’s widely regarded as one of the most advanced CBDCs in the world. The Chinese government has taken various measures to support the pilot of the digital yuan since it began piloting the e-CNY in 2019.

What is the e-CNY?

The e-CNY is China’s digital currency for the yuan. The world’s second-largest economy is aiming to provide a digital version of the yuan that meets the public’s demand for money in the digital economy era. 

In 2014, the central bank set up a task force to study digital fiat currency, and in 2016, the PBOC established its Digital Currency Institute. The People’s Bank of China noted in a 2021 whitepaper that the development of the digital economy calls for new retail payment infrastructures that are safe, inclusive and adaptive to the digital era. 

Since the inception of the digital yuan pilots in late 2019, the PBOC has expanded its digital yuan trial to at least 26 locations in 17 provincial-level cities and regions, including Beijing, Shanghai, Shenzhen and Suzhou, state media Xinhua reported in April 2023.

Cashless push

Both Alipay and WeChat Pay are ubiquitous mobile payment methods in China and, to some extent, have integrated the e-CNY into their payment services to boost retail use.

The PBOC has also been testing the digital yuan for cross-border payments, with Hong Kong playing a key role. The government plans to expand the pilot testing of the digital yuan so more residents in Hong Kong may top up their e-CNY wallets through the local existing “Faster Payment System,” said Paul Chan, the financial secretary of Hong Kong, in a budget speech in February 2024.

As part of the pilot, the central government is eyeing cross-border settlements. For example, in October 2023, PetroChina, a Chinese oil and gas company, completed the first crude oil transaction settled using the digital yuan.

Privacy concerns

Concerns have also arisen surrounding privacy and traceability of the digital yuan even though the PBOC has downplayed concerns.

Changchun Mu, head of the PBOC’s digital currency institute, wrote in a 2022 document that the e-CNY adopts a “two-tier” operating system. This is where the PBOC supplies the digital yuan to authorized operators, which then provide exchange and circulation services to the public. 

Such authorized operators would collect necessary personal information, while the PBC would only process inter-institutional transaction information without holding the personal information, according to Mu.

“Only when suspicious transactions arise can the authorized operators apply to obtain relevant data for further analysis to ensure the fulfillment of their legal obligations, such as with respect to AML/CFT,” Mu added.

Mu opined that the e-CNY “needs to do a good job” of risk prevention on the basis of protecting privacy, so as to prevent it from becoming a tool used by criminals.

Advocating use by foreigners

The PBOC is also attempting to guide foreigners to use the e-CNY while they’re in China. In March 2024, the central government published a user guide, detailing how a foreign visitor can download the pilot app and top up the balance with their Visa or Mastercard cards.

The guide noted that users can register an e-CNY wallet with mobile phone numbers from over 210 countries and regions.