Introduction
More than fifty countries in the world have already shown interest in issuing their digital currency (CBDC), and are at the research or development stage. France, Canada, the United Arab Emirates, South Korea, South Africa, Uruguay, as well as China are at the CBDC pilot testing stage (Xu & Scott, 2021). The Renminbi digital yuan is one of the varieties of the digital currency of central banks, which is being talked about more and more often in the world.
History of Development
In mid-July 2021, the People’s Bank of China published the document “Renminbi Research and Development Progress in China”, dedicated to the digital yuan (Xu & Scott, 2021). It is informally called the White paper of the new digital currency. The document was prepared by a special unit responsible for the research and development of the digital yuan (Renminbi). Since 2014, the People’s Bank of China has indicated an interest in developing a CBDC focused on the domestic market for settlements between individuals (Louie & Wang, 2021). Research, testing, and implementation are conducted centrally and supervised by the Finance Committee of the State Council of the People’s Republic of China (Louie & Wang, 2021).
The reasons for the release of the digital yuan in the White Paper were improving the quality of finances and services and reducing the costs of maintaining the circulation of the money supply, which in 2020 amounted to 8.43 trillion yuan (Xu & Scott, 2021). The objectives of the issue are to meet the demand of the population for digital money and to increase the convenience of payments efficiently and securely.
Current Status
As part of the pilot project for the implementation of the Renminbi, 1.32 million transactions were made in six cities on June 30, 2021, to pay for goods and services with digital yuan, including utility bills (Samek & Scott, 2021). To date, more than 20 million wallets have been opened for individuals and 3.5 million for legal entities with a total transaction amount of 34.5 billion yuan (Samek & Scott, 2021). Through the lottery, 200 thousand citizens of the country received 200 yuan each for free (Samek & Scott, 2021). To use the digital yuan, a payment card is already in effect, which has a built-in digital scoreboard with the current balance.
The level of the balance or the volume of transactions of Renminbi is not disclosed at the moment. However, the principle of anonymity is declared to meet the demand for micropayments, for which it will not be necessary to open an account, and the traceability of large transactions to prevent tax evasion, illegal activities, and whitewashing (Louie & Wang, 2021). Operators are actively developing mobile applications to use Renminbi and offer them for installation to their customers.
Conclusion
Even at the testing stage, Renminbi has already become a digital currency that the whole world is talking about, and the volume of transactions and the number of users are comparable to some fiat currencies of the world. Although the official documents do not reflect issues related to the identification of users by the amount, time, and place of payment, there is a possibility of embedding the digital yuan in the social rating system in China. The fact of publication of the digital yuan White paper can be considered a signal indicating the readiness of the Chinese government for a dialogue in the field of cryptocurrency regulation, especially in connection with the recent prohibitive measures in the circulation of bitcoin and mining. The question remains: what will be the dynamics of the use of digital and “classic” yuan in the coming years?
References
Louie, B. L., & Wang, M. (2021). China’s forthcoming digital currency: Implications for foreign companies and financial institutions in China. Journal of Investment Compliance, 22(2), 195-200.
Samek, M., & Vlasta, M. (2021). Digital yuan – currency or policy tool? Journal: Acta Universitatis Carolinae Juridica, 67(3), 111-127.
Xu, J., & Prud’homme, D. (2021). China’s digital currency revolution and implications for international business strategy. London School of Economics Business Review, 17(2), 1-4.