Countries around the world still embrace faith in their national digital currencies but will it change the way their people pay?
Cities in China have reportedly put promotional efforts into maximizing the adoption of the central bank digital currency (CBDC), or digital yuan.
According to Global Times, local governments initiated around 200 activities during the Lunar New Year festival, ranging from subsidizing to providing consumption vouchers, among others.
China’s Giveaway Method
Jinan, a capital city in Shandong province, and Lianyungang, a city in Jiangsu province, gave away consumption vouchers in the form of digital yuan.
Other cities such as Shenzhen, the most populous city in China, sent out over 100 million yuan worth of CBDC (approximately $14,7 million) to provide subsidies to the catering businesses.
Those campaigns’ estimates put the expense figure at around 180 million yuan and some cities had money well spent. Hangzhou, the provincial capital of China’s Zhejiang, conducted an e-CNY voucher giveaway on Jan. 16.
The activity drew citizens’ takeup within nine seconds, Global Times cited data from the e-commerce platform Meituan.
When China introduced the concept of digital yuan (CBDC) in 2014, the country aimed at strengthening its position in the global monetary system.
So far, the country is still leading the digital currency race with the total number of e-CNY transactions surpassing 100.04 billion yuan ($14 billion) in October 2022.
New Money is Here
On Feb. 2, Chinese Communist Party officials revealed the city looked to achieve the 2 trillion CNY ($300 billion) mark by the end of 2023. China’s CBDC pilot is set to expand this year.
However, the experiments that the country was conducting hit practical hurdles as $14 billion remained a modest figure, according to Xie Ping, a former official of the People’s Bank of China (PBOC).
The ex-central banker suggested changes in e-CNY use cases to cope with fraction growth.
Bank of England: Likelihood of Digital Pound
Speaking of the CBDC projects, the UK is among the countries that have been mulling on the feasibility of digital currency.
Currently, in the exploration phase, a digital pound will likely be introduced by 2030, according to a new update from the Bank of England (BoE). The central bank plans to introduce the road map of the digital pound next week.
In addition, the Bank of England and Treasury will also launch a joint public consultation to explore and assess the case for a UK CBDC.
The Governor of the Bank of England Andrew Bailey and Chancellor Jeremy Hunt stated,
“On the basis of our work to date, the Bank of England and HM Treasury judge that it is likely a digital pound will be needed in the future.”…“It is too early to commit to build the infrastructure for one, but we are convinced that further preparatory work is justified.”
His Majesty’s Treasury reportedly looked for a CBDC head through job recruitment posted earlier this year. The news likely confirms that the UK authorities step up in the CBDC race.
The revelation is the latest effort of UK authorities to combat the decline in cash use. Online payments have become the leading form of payment since the pandemic. Around the same time, crypto adoption also arose.
The BoE previously asserted that the role of CBDC, a regulated digital currency, is not cash’s replacement.
Rather than the relationship between cash and CBDC, most criticism centers on the clear use case of CBDC and the risks it potentially performs. The Lords Economic Affairs Committee questioned the convincing reason for the usage of a UK CBDC in its report published in January 2022.
Sufficient demand for CBDC remains one of the major things to consider. Nigeria, one of the first countries to launch CBDC, has failed to encourage citizens to adopt its digital currency eNaira.
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Nicholas Say