Digi-Yuan Takes Center Stage at the Beijing 2022 Olympics
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The Global Debut of the Digi-Yuan
As the Winter Olympics kick off this week, Beijing makes history as the first city to host both the summer and winter games. This event serves not only as a sporting spectacle but also as a platform for the international introduction of China's digital currency, the digi-yuan.
The Evolution of Winter Olympics Participation
Historically, there has been a noticeable shift in the representation of women in the Winter Olympics. For instance, only 11 female athletes participated in the inaugural 1924 Chamonix games, one of whom was just an 11-year-old girl named Sonja Henie. Although she finished last, she returned in 1928 to clinch the gold medal at age 15.
The Olympic Games today are much more commercialized than in the past. This year, Beijing is utilizing 49 million gallons of chemically-treated water for snow production, raising concerns among some athletes regarding safety. A study from Loughborough University warns that by 2050, only 11 of the 21 cities that have previously hosted winter games will have sufficient snow.
In the context of innovation, China aims to use this global event to showcase its digital currency, despite the limited number of attendees due to COVID-19 restrictions. The U.S. government has cautioned its athletes against downloading the currency's app, citing privacy concerns.
Introducing the Digi-Yuan
Known by several names, including e-CNY and digital RMB, the digi-yuan has been in testing since 2020, with the launch of a lottery system that allowed lucky winners to spend digital currency in local businesses. Currently, 76 countries are experimenting with digital currencies, but China leads the pack as the first major economy to implement a retail digital currency.
As of now, the digi-yuan has garnered over 250 million users and processed transactions worth approximately 87.5 billion yuan ($13.78 billion). Although this figure seems impressive, it pales in comparison to Alipay, which handles approximately $1.6 trillion in monthly transactions.
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The Structure of the Digi-Yuan
According to research from Deutsche Bank, the digi-yuan operates in a tiered structure:
- Tier 1: The People's Bank of China (PBOC) issues the currency and has launched a digi-yuan wallet app.
- Tier 2: Approved state banks and digital banks allow users to create digi-yuan wallets.
- Tier 3: Other financial institutions provide payment services but cannot exchange digi-yuan.
Consumers can utilize this currency for retail purchases without needing a bank account, a notable advantage over existing mobile payment apps like Alipay and WeChat Pay.
Comparing the Digi-Yuan to Cryptocurrencies
It's important to clarify that the digi-yuan is not a cryptocurrency in the traditional sense. Unlike decentralized cryptocurrencies, the digi-yuan is issued by the state and closely monitored. While it offers a degree of anonymity, it is not as private as Bitcoin. The Chinese government is likely to maintain oversight, potentially integrating the currency with existing surveillance technologies.
Moreover, the digi-yuan resembles a stablecoin more than a typical cryptocurrency, especially considering China's ban on cryptocurrencies in 2021.
China's Broader Financial Strategy
The Chinese government aims to digitize its currency to replace traditional cash and counter the influence of cryptocurrencies. With over 600 million individuals engaging in mobile payments, the government has even penalized businesses for refusing cash transactions.
Prominent players like Alipay and WeChat Pay dominate the market, but the introduction of the digi-yuan offers an alternative that can facilitate offline transactions and cater to the unbanked population, particularly in rural areas.
The Global Financial Landscape
The Winter Olympics serves as a launchpad for the digi-yuan's international rollout, aiming for cross-border transactions. However, long-term challenges loom, particularly in displacing the U.S. dollar's dominance in global markets.
Currently, the U.S. dollar accounts for over 60% of global foreign exchange reserves, while the Chinese renminbi makes up only 2.4%. China's push for the digi-yuan could enhance the renminbi's standing, yet substantial hurdles remain.
China's Digital Yuan will Change the World | Real Talk China Ep6 - This video explores the implications of China's digital yuan on global financial systems and its potential to reshape the economy.
Ultimately, while the digi-yuan signifies a significant step in China's digital currency initiative, its acceptance among the urban populace, already accustomed to platforms like Alipay and WeChat Pay, remains uncertain. The Olympics may offer a glimpse into the future of digital transactions, but whether it will be enough to sway public opinion is yet to be seen.