Beijing, China – In December 2020, Shen Xue, retired Chinese pair skater and 2010 Olympic champion, appeared on Chinese television as the first person to use the country’s official digital currency to buy a Beijing Subway pass.
With a swipe on the turnstile using ski gloves fitted with the latest digital yuan wallet, Shen marked the launch of China’s campaign to promote its central bank digital currencies overseas during the 2022 Beijing Winter Olympics.
The Winter Olympics was originally planned as a splashy debut for the e-CNY, introducing the digital form of China’s sovereign currency to millions of global visitors. Foreign visitors will be able to use e-CNY to buy items during the games, which officially commence on Friday, without a domestic bank account.
Those plans went sideways with the outbreak of the COVID-19 pandemic, during which the Chinese capital has been largely closed to the world. Under a “zero COVID” policy aimed at halting any transmission of the virus, Beijing has adopted a “closed loop system” for the games under which the 11,000 participants are sealed off from the general public.
“The Olympic Games would have been the first real chance for tourists and Chinese nationals alike to familiarise themselves with the digital yuan,” Craig Singleton, senior China fellow at the Foundation for Defense of Democracies, a Washington, DC-based think-tank, told Al Jazeera.
However, that door slammed shut when Beijing decided to cut the games off from local spectators and overseas visitors, Singleton said.
A frontrunner in the development of central bank digital currencies (CBDCs), the People’s Bank of China first mooted a digital yuan in 2014 as its peers were still weighing the benefits of virtual currencies. Unlike cryptocurrencies, which China banned last year amid concerns about financial stability and crime, CBDCs are issued and controlled by a central authority.
In January, the central bank announced that more than 261 million individual users nationwide had registered a digital yuan wallet, an app for using e-CNY. The number of users has nearly doubled since October.
Visitors to the 2022 Winter Olympics in Beijing can use China’s e-CYN for purchases [Jae C Hong/AP Photo]
For more than a year, Beijing has been pilot-testing its digital currency for use at the games, recording 9.6 billion CNY ($1.5bn) in transactions by the end of 2021, according to the Beijing Financial Supervision Authority.
The regulator said the city had tested the digital yuan in more than 400,000 “scenes” involving real purchases of goods and services before the Olympics, with more than 12 million individual users and 1.3 million company users in the capital registering on the app.
“Today’s China has become highly digital and cashless for the Chinese people, but there are no systems available to connect foreign credit cards,” Richard Turrin, a Shanghai-based consultant and author of Cashless: China’s Digital Currency Revolution, told Al Jazeera.
At present, foreign visitors often find themselves unable to make payments in China, especially to small vendors and taxi drivers, Turrin said.
In 2020, a record 432 trillion yuan ($67.9 trillion) in transactions were carried out via mobile payments, mostly on Alibaba’s Alipay and Tencent’s WeChat Pay.
Bloomberg Intelligence estimated last year that the digital yuan could grab a 9 percent domestic market share by 2025. Alipay and WePay are currently estimated to have a combined market share of more than 90 percent.
For Chinese citizens, switching from tech giants’ digital payments to a CBDC is an easy transition, according to Suji Yan, founder of Mask Network, a Singapore-based cryptographic and encryption start-up.
“They are already payment users of tech giants like WeChat and Alipay, and now it is just a change [of payment apps], which makes no difference for the majority of Chinese users,” Yan told Al Jazeera.
Distrust overseas
Beijing’s Olympic showcase for the digital yuan may find a less receptive audience overseas, amid growing mistrust of Chinese tech, especially where data privacy and regulatory scrutiny are concerned.
“For foreign users, anonymity and privacy is the main issue of concern for the application of digital yuan,” Sebastian Maus, global head of payments at Berlin-based consultancy Roland Berger, told Al Jazeera.
“And this is a big concern [for foreign users]. Therefore, I doubt that a lot of tourists or athletes will really download the app and use it.”
Currently, four levels of user category are available, allowing users to decide how much information to share with the digital wallet app to reach different usage limits, according to state media Xinhua.
“But even in the simplest model with just a cell phone number, no one really believes that their transactions will be anonymous and will be private,” said Maus.
In July, three US senators called on the US Olympic Committee to forbid American athletes from “receiving or using the digital yuan during the Beijing Olympics” citing privacy concerns. Several other countries, including the United Kingdom and Canada, have offered similar advice to their athletes.
Today at the Olympic Village, the digital yuan is one of only three payment options for foreign athletes and visitors, along with cash and Visa cards, according to three people familiar with the matter.
Beijing’s plans to showcase the digital yuan to the world have been hampered by the pandemic [File: Tingshu Wang/Reuters]
“Many of us are using the digital wallet here since I didn’t bring cash with me – it is quite convenient,” a Chinese volunteer staying at the Olympic Village told Al Jazeera. “I don’t understand this.”
“The foreign athletes mostly use their Visa cards though,” said the volunteer, who asked not to be named.
Foreign visitors who choose to sign up for the digital wallet are likely to revisit the currency only when coming to China in the future, said Maus of Roland Berger.
“But this is really a small portion,” he said.
Beyond retail transactions, Beijing could be looking to carry out big deals with firms and other countries in e-CNY, industry watchers predict.
“This would need to be realised through slow political agreements made with central banks in different countries, mainly Belt and Road countries and RCEP countries,” said Turrin, the Shanghai-based consultant, referring to the world’s largest free-trade pact and the Belt and Road Initiative, Beijing’s cross-continental infrastructure drive. “This will be a very slow and limited rollout of its international use.”
At present, the digital yuan is primarily used for retail transactions within China, People’s Bank of China Governor Yi Gang said in November.
Despite the large number of registered users in China, analysts say the digital yuan has a long way to go when it comes to its use overseas.
“In their home countries they cannot spend the Chinese yuan with a digital wallet, for example in Europe,” Maus said. “And I doubt that there will be [acceptance of the digital yuan] in the next five to 10 years.”
