Although the digital yuan is one of the select few payment methods that is being accepted at the Winter Olympics in Beijing, not many people are going to get a chance to use it.
China faces delays to the mass adoption of the digital yuan because of COVID restrictions at the upcoming Winter Olympics, experts have warned.
The central bank digital currency — which has been extensively trialed in major cities for the past two years — was meant to play a starring role when the Games begin in Beijing on Feb. 4.
Officials from the Bank of China had declared that the sporting event would be an opportunity to "showcase China's latest fintech achievement to the world," but international spectators are now being blocked from attending.
This means that, although the digital yuan is one of the select few payment methods that is being accepted at the Games, not many people are going to get a chance to use it. Craig Singleton, a senior China fellow at the Foundation for Defense of Democracies, told CNN:
"The Olympic Games would have been the first real chance for tourists and Chinese nationals alike to familiarize themselves with the digital yuan, but that door slammed shut when the Chinese government decided to severely restrict the number of Olympic spectators."
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Bigger Problems
Separately, CNN reports that transaction volumes involving the digital yuan stood at about $1.4 billion a month on average throughout the second half of 2021. To put that into context, figures from 2020 suggest the popular Alipay app processes $1.6 trillion a month. There's little doubt that this has risen even further given how the coronavirus pandemic has accelerated the transition from cash and coins to contactless payments.
Although it's claimed that close to 20% of China's population has now downloaded the central bank's app, the CBDC can only be used in participating cities and regions.
And Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, told the news outlet that there might be little reason for consumers to make the switch:
"The ecosystems that have been built now for a decade around the big tech firms are unbeatable in terms of network and convenience … The payment experience does not tend to strike most users as any different or better than what is already on offer."
Another concern surrounding the digital yuan surrounds the central bank's publicly stated goal of achieving "controllable anonymity" — suggesting that the door would be open to scrutinizing a consumer's transactions. Some think tanks also fear that China has amassed a compelling advantage because of how its CBDC is at a far more advanced stage than other major economies, with the U.S. still weighing up whether to develop one.
When all things are considered, it's worth noting that many of the challenges that China is experiencing with its CBDC will be experienced by other countries too. What will encourage consumers to embrace digital dollars and pounds when the likes of Apple Pay already do the job — and can central banks allay privacy concerns?
