2022 kicked off with a major leap forward for the e-CNY – also known as the digital yuan, as Chinese authorities expanded the range of utilities included in its pilot project.
Three cities in Zhejiang province – located just south of Shanghai – have started experimenting with digital RMB to pay income tax, stamp duty and social security contributions. This development could give significant exposure to e-CNY, which faces fierce competition from other online payment platforms.
A beta version of the digital yuan app has been officially launched for iOS and Android on Chinese app stores. Although the coin has been available to some users in China for over a year under limited pilot programs, this is the first time it has explored a variety of tax payment methods using the digital yuan.
China continues to quietly test e-CNY
The app, which basically involves physical money converted into a digital form, is available on Android app stores in China and Apple’s App Store. The distribution of e-CNY occurs through a two-tier system that transfers digital currency from China’s central bank to commercial banks, which then distribute the currency directly to consumers.
35 Chinese commercial banks are now allowing customers to access the country’s central bank’s new digital currency (CBDC), suggesting another step towards wider rollout.
The Industrial and Commercial Bank of China (ICBC) was the first bank in the country to add full support for the digital renminbi. The public lender has enabled a feature that allows customers to convert their digital yuan into cash at more than 3,000 ATMs across Beijing.
The digital yuan, which is controlled and issued by the Chinese government, is a central bank digital currency (CBDC). Still, the People’s Bank of China hasn’t officially assigned a monetary value yet because the digital yuan hasn’t been launched to the public yet.
This pilot program has since been gradually expanded through invitations and cash incentives to eventually reach over 150 million registered users.
On a commercial scale, e-CNY is integrated with Alibaba’s ecosystem of services. This allows users of Alibaba’s food and grocery delivery apps, as well as its e-commerce platforms, to pay for orders using e-CNY. WeChat, owned by Tencent, also allows users to select e-CNY as a payment option to pay on its messaging app and payment platform. The adoption comes even though the CBDC coin is a direct competitor to Alibaba’s Alipay and WeChat wallet.