For 36 years, Visa has paid hundreds of millions of dollars to be an Olympic sponsor, ensuring its branding is all over stadiums and athletes, and that no one attending or watching the Games even thinks of Mastercard.
At the Winter Olympics in Beijing, there is a competitor however: the Chinese government. Alongside all the Pay with Visa signs is a smaller logo for e-CNY, or the digital yuan, China’s government-backed electronic currency.
The People’s Bank of China, the country’s central bank, has been trialling the digital yuan in a dozen or so pilot areas for two years now, but the Winter Olympics are the first time most foreigners have had a chance to use the new currency.
But if Beijing 2022 was supposed to be the digital yuan’s global coming-out party, that plan was dashed after China barred international spectators because of COVID-19 concerns, meaning only a relatively small number of foreigners – journalists, Olympic staff and athletes mainly – are being exposed to the digital yuan.
And for those within the Olympic bubble, aside from the occasional logo, there isn’t much sign that a grand experiment is under way, nor is it particularly easy to take part.
This reporter downloaded the e-CNY app and opened a digital wallet with ICBC, but was unable to add any funds “due to compliance reasons.” A Bank of China wallet at least provided a way to do so, but only for people already possessing a Bank of China bank account.
By comparison, Alipay or WeChat Pay – the country’s largest payment providers, owned by tech giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd., respectively – allow users to easily link bank or credit cards to add funds. The Globe and Mail was finally successful in getting some e-CNY by swapping paper notes at a Bank of China outlet within the Olympic village, but only after providing a passport to open a “hardware wallet,” essentially a cash card that could be used at contactless terminals.
Bank staff were very helpful but confused about why a foreigner wanted to use the digital yuan. Those manning the tills at various food outlets and coffee stands in the media centre were equally bemused. One asked how this reporter had heard about e-CNY and seemed perplexed, and not entirely believing, when told the government was promoting it heavily.
Promoting it they are, however. State media has been full of glowing coverage of the electronic currency’s successes and the potential for expansion. Speaking to broadcaster CCTV last month, Bank of China official Li Xin said, “Launching the digital yuan at a big party like the Winter Olympics can showcase China’s latest fintech achievement to the world.”
The digital yuan has global ambitions. Chinese officials see it as a way to internationalize the country’s currency, used for just 2 per cent of global transactions today.
According to state media, by the end of 2021, roughly 261 million digital yuan wallets had been opened, conducting more than $17.4-billion in transactions. That figure pales in comparison, however, to the more than $2-trillion that Alipay processes every month. Alibaba and Tencent’s products are also used internationally, albeit mainly by Chinese tourists.
The success of Alipay and WeChat Pay is one of the reasons Beijing is pressing ahead with the digital yuan, even as many other countries are years away from even holding trials of electronic currencies, said Viktar Fedaseyeu, a finance professor at the Shanghai-based China Europe International Business School. China is almost cash-free already, especially in major cities, but this has been driven by private companies, not the state.
“A very large share of payments in China go through these two huge platforms, and a lot of these payments actually bypass bank deposits,” Dr. Fedaseyeu said. “In the U.S. and Europe, everything goes through banks ultimately, so the central bank has a lot more power over money in circulation. In China, the central bank has less power, because of electronic payments.”
The digital yuan would restore this power and then some. Were all China’s electronic payments to be done through e-CNY, the government would have “unprecedented real-time monetary and economic oversight,” said Kai von Carnap, an analyst at the Mercator Institute for China Studies in Berlin.
Central banks around the world are watching China’s experience closely. The decline in physical cash use, combined with concerns about private digital money backed by large technology companies, has sparked a flurry of research and design work on central bank digital currencies, or CBDCs. A Bank for International Settlements survey of global central banks last year found 86 per cent of respondents were conducting some form of research into government-backed digital money.
In Canada, the central bank has been working on a possible digital loonie since 2017. This work accelerated during the pandemic, with the Bank of Canada hiring a team of cryptographers and publishing a series of papers on the topic. The decision to launch a CBDC rests with the federal government, but the central bank is laying the groundwork in case it gets the go-ahead.
In China, digital yuan advocates argue the government could also use it for innovative stimulus programs, such as distributing money that can only be spent on certain products and services, or expires after a certain date. Already during the COVID-19 pandemic, some municipalities in China have experimented with digital vouchers distributed through Alipay.
“You can regulate money supply and can also direct consumption into projects the central government thinks are most important,” Dr. Fedaseyeu said.
Some consumers may be concerned about the amount of information the government could have about them through the digital yuan, but similar amounts of data are already possessed by Alibaba and Tencent, neither of which could realistically oppose a Chinese government request for it, and this has not prevented mass adoption of their respective payment technology.
Consumers may actually feel more comfortable in the long run with the government gathering data on them than private companies. The Bank of China at least doesn’t want to sell you ads.
While early days yet, Dr. Fedaseyeu predicted the digital yuan could gradually edge out both Alipay and WeChat Pay, or at least replace how those apps process transactions. Already the government is encouraging Alibaba and Tencent to support e-CNY, which they may be keen to do, as that ensures they retain access to valuable user data, rather than risk people switching to a completely government-controlled app.
The international prospects of the digital yuan, at least in the near term, are less clear, and the Olympics have proved less than an ideal testing ground.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.