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Chinese Authorities Wants McDonald's to Expand its Digital Yuan Acceptance

In a bid to advance the national integration of its Central Bank Digital Currency (CBDC) dubbed the Digital Renminbi (e-CNY), Chinese authorities are reportedly mounting pressure on McDonald’s as well as other American firms to expand their acceptance of the e-CNY.

Before this time, McDonald’s has been receiving payments through the digital Renminbi in about 270 of its locations in mainland China. Still, the recent reports indicate that Chinese authorities want the firm to expand to more outlets in the nation.

While McDonald’s said that there is no pressure on it as claimed, sources who spoke to the Financial Times said payment firm Visa Inc and apparel brand Nike is also being demanded to expand their digital renminbi acceptance.

“I always assumed large US firms would be put under pressure to provide weight to the digital renminbi because most large retailers will be put under pressure and American firms won’t be exempted,” Darrell Duffie, a co-head of an e-renminbi project run by Stanford University’s Hoover Institution, told the FT.

China’s pursuit of a sovereign digital currency is miles ahead of other major economies developing their own CBDCs. The Asian giant has been conducting a series of digital renminbi trials involving small-scale retail transactions, and the majority of the tests feature companies with a large customer base.

With the 2022 Beijing Olympics ahead, the People’s Bank of China (PBoC) is doing its best to ensure an optimal distribution of the digital Renminbi, which it hopes will be used by guest athletes for transactions. While China is notably working to turn its economy into a cashless one by 2022, the apex bank has not given any official details as to the timeline the digital Renminbi will be officially launched.

DespiChina’sa’s efforts, the Bahamas now ranks as the first nation to launch a fully functional CBDC, a feat it recorded last October.

HK FinTech Week: China’s eCNY Wallet Registers 140M Users, Rises 6 Times More, says PBoC Official

China’s Central Bank – the People’s Bank of China (PBOC) – has announced that the number of users of its digital yuan wallets, also popularly recognized as the e-CNY, has risen by more than six times over the past four months.

Speaking at the Hong Kong Fintech Week conference on Wednesday, November 3, Mu Changchun, the Director-General of China’s Central Bank Digital Currency Research Institute at the People’s Bank of China, said that 140 million users in the country have activated the digital yuan wallets.

Mr. Mu stated that that figure represents 10% of China’s entire population and has significantly risen since July when the PBoC mentioned in its first-ever digital yuan white-paper that 20 million retail users had activated e-CYN wallets as of June 30.

Moreover, Mr. Mu disclosed that the number of corporate digital yuan wallets has increased almost three times to stand at 10 million currently from 3.5 million witnessed four months ago.

The executive director also stated that the volume of transactions made through the digital yuan wallets has increased to 150 million, worth a total of 62 billion yuan ($9.7 billion).

What’s Next for China’s CBDC project?

While such developments have recently happened, Mr. Mu stated that there is not yet a specific launch plan for the digital RMB (e-CNY).

However, Mr. Mu mentioned three areas where more work is required to do. He stated the first area, which is to expand the capacity of the digital renminbi. Although China has already developed a wide variety of wallets and numerous use cases, Mr. Mu stated that more work is needed to expand it further, saying that it is being built for “all merchants.”

Many digital yuan pilot projects have been at the consumer level, and now the PBoC is beginning to pay attention to where money is coming from – businesses.

Mr. Mu further mentioned the second area, which is the ongoing task to enhance security and risk management, and these apply to the entire life-cycle of the digital yuan wallet, including data security, financial information security, encryption algorithm security, and ensuring business continuity.

Mr. Mu finally talked about the regulatory framework as an area where the PBoC is still working. He highlighted a revised draft of the People’s Bank of China Law that includes the renminbi in physical and digital forms, but stated that “regulatory measures for eCNY need to be tailormade.”

Macau Likely to be Test Bed for China's Digital Yuan: Reuters

Macau is expected to be a testbed for China’s digital yuan, also known as the e-CNY, as casino owners prepare to bid for new licenses in the city for the first time in two decades.

Chinese regulators will be looking forward to using the casino licensing opportunity to test the digital yuan in 2022, Reuters reported.

Among many other casino companies in Macau, Sands China and Wynn Macau have shown eagerness to participate in the government’s plan.

The government authorities have also pitched ideas like appointing agents to supervise daily casino operations, according to Reuters.

Last November, when central bank governor Yi Gang suggested China’s newly developed cryptocurrency could be useful for fighting crime such as money-laundering and resolving complex cross-border payments problems, Macau might have been one of the places in mind.

In December, junket operator Suncity’s boss Alvin Chao was implicated in a probe into illegal gaming, forcing his casinos to be completely shut down. Suncity facilitated bets for wealthy VIPs, a market segment worth around $8 billion in gaming revenue the year before COVID-19 struck, Reuters reported.

Using Macau as a testbed for digital payments would benefit Beijing’s desire for greater oversight of cash flows and customers and since the casino hub is situated outside Chinese capital controls, the city is considered an ideal place to test the technology before rolling it out more widely in the mainland.

According to Bernstein analysts estimate, the average high roller lost over $27,000 on each visit to the tables in Macau.

A senior Chinese central bank official said that some 140 million people had registered “wallets” for the new digital yuan as of October and used it for transactions totalling around $9.7 billion, according to a Reuters report from November 2021.

Although 2022 is likely to be the year for e-CNY, no official launch date for the digital currency has been announced yet.

Since China’s ban of decentralised cryptocurrencies like Bitcoin, the digital yuan is predicted to substitute them.

According to a Blockchain.News report, China implemented its zero-tolerance policy for Bitcoin mining in May 2021, with a series of crackdowns on miners that finally led to the exodus of mining firms from the Asian nation. Beijing’s negative stance about crypto miners is fueled by the supposed environmental impact as the majority of the nation’s power source comes from coal.

Eventually, Chinese miners found the right footing by relocating to other areas like the United States.

WeChat Offers Digital Yuan Payments Ahead of Beijing Winter Games

WeChat has become compatible with payments using the digital yuan ahead of the Beijing Winter Olympics, owner Tencent Holdings said.

The move by Tencent comes at a time when the Chinese government plans to test its digital yuan around Olympic venues next month when the Games begin.

From the perspective of Tencent, whose business strategy revolves around WeChat, the move is a strategy to prevent a loss of users from the app.

To use the payment feature on WeChat, a user must download the People’s Bank of China’s e-CNY app and create a digital yuan wallet with WeBank – the virtual bank backed by Tencent, followed by linking the WeBank wallet to the WeChat account to initiate payments.

Whether the central bank’s digital yuan will compete, or coexist, with other smartphone payment platforms is yet to be seen.

The world’s largest chat app has about 1.2 billion users, mainly in China. Currently, China’s digital yuan is limited to a few local cities, and only a handful of businesses accept the currency.

According to a January 5, 2021, report by Blockchain.News, the People’s Bank of China (PBoC) extended its pilot tests for the digital yuan to launch a new mobile wallet. The new wallet is available to a select few as it is still in the development phase.

The report stated that the new mobile wallet is notably available on the Google Play Store and the Chinese-supported App Store for iOS users.

Along with WeChat, the government also plans to turn Macau into a testbed for the digital yuan as casino owners prepare to bid for new licenses in the city for the first time in two decades.

U.S. Should Examine Chinese Digital Yuan Rollout during Winter Olympics: Senator Toomey

Senator Pat Toomey, a senior member of the U.S. Senate Banking Committee, requested the U.S. administration to closely examine the Chinese digital yuan’s rollout during Beijing Winter Olympics.

In a letter to Treasury Secretary Janet Yellen and Secretary of State Anthony Blinken last Friday (February 4), he criticized China is using the Beijing Winter Olympics as “an international test for the digital yuan (e-CNY), which has been piloted domestically since 2019.”

“Given the prospective threat to U.S. economic and national security interests, I request that the Treasury and State Departments closely examine Beijing’s CBDC rollout during the Olympic Games.”

Citing analysts that China utilizes “e-CNY to subvert U.S. sanctions, facilitate illicit financial flows, enhance China’s surveillance capabilities and provide Beijing with a ‘first-mover advantage, such as setting standards for cross-border digital payments.”

At the time of the Beijing Winter Olympics, the Olympic Village, athletes and tourists can use cash, Visa cards or digital yuan for transactions.

In China, local payment firm WeChat becomes compatible with payments using the digital yuan ahead of the Beijing Winter Olympics, owner Tencent Holdings said.

The Digital Yuan (e-CNY), China’s Central Bank Digital Currency (CBDC) is growing at a fast pace as data released by Zou Lan, director of the PBoC financial markets department revealed the new legal tender has inked a total of 87.57 billion yuan ($13.68 billion) in transactions since public trials began, according to CNBC.

Chinese regulators will be looking forward to using the casino licensing opportunity in Macau to test the digital yuan in 2022, Reuters reported.

On January 5, 2021, reported by Blockchain.News, the People’s Bank of China (PBoC) extended its pilot tests for the digital yuan to launch a new mobile wallet. The new wallet is available to a select few as it is still in the development phase.

However, China’s crackdown last year resulted in providing an opportunity for the United States to be a pioneer in crypto innovation. Decentralized and unlicensed online money was considered a threat to Beijing’s digitization. Chinese regulators have banned cryptocurrency activity locally. Tommey believes the U.S. should take this opportunity to embrace crypto innovations, based on “individual liberty and other American and democratic principles.

HKMA Seeks Public Consultation for e-HKD Development

In Hong Kong, the local financial regulator has issued a discussion paper to the public, asking for the public opinions about introducing domestic retail central bank digital currency (rCBDC), or e-HKD.

The Paper, published by the Hong Kong Monetary Authority (HKMA) on Wednesday, Apr 27, entitled “e-HKD: a policy and design Perspective”, covers various issues, including the potential benefits or challenges brought by rCBDC, design considerations, such as the issuance mechanism of e-HKD.

Eddie Yue, Chief Executive of the HKMA, said the Paper marks another milestone in our exploration of the e-HKD:

“We strongly encourage the public and the industry to take part in this important consultation and share their views with us. The comments received would help us formulate the strategy for best positioning our financial market in the rapidly evolving rCBDC space.”

This Paper is the second part of the study, followed by the initial findings mainly focusing on the technical perspectives of introducing e-HKD. The latter, meanwhile, mainly focuses on policy and design aspects of introducing the e-HKD.

HKMA asked for public opinions to submit their ideas before May 27.

Local media MingPao reported, citing Yue’s comments regarding the development of e-HKD, that one of the differences between digital payment and e-HKD is the level of risks. The head of HKMA emphasized that “the credit risk of e-HKD is zero,” as the digital currency is issued or supported by HKMA. In contrast, the deposit stored in digital wallets would be subject to retail institutions. Yet, the nature of digital currency is unable to be anonymous like the banknote; it has to be traceable at a certain level under supervision and regulation. The administration needs to be cautious regarding privacy and data access to users.

Outlook of developing e-HKD & cryptocurrency

Meanwhile, the city also faces various fintech challenges nowadays, including the development of digital payments and the rising of cryptocurrencies. HK needs to remain competitive among its regional counterparts in China and Asia. The administration has rolled out serval digital payment methods, including Octopus, FPS and even different mobile wallets, to respond to challenges like e-CNY trials from mainland China.

In addition, the authority also needs to speed up to explore the potential in terms of cryptocurrencies.

Early this week, The FinTech Association of Hong Kong (FTAHK) said the institution supports in principle concerning HKMA’s proposed risk-based approach to the regulation of payment-related stablecoins.

China Guangzhou Public Transport Launches Digital RMB Payment Function

China’s Guangzhou became the first city to launch a pilot function of a digital RMB payment code to pay for bus rides.

Passengers can now use the digital yuan (e-CNY) CBDC to pay for public transportation on 10 bus routes through the digital yuan app.

Passengers can download the “Digital RMB (Pilot Version)” app in the mobile application market, and after opening the digital RMB CCB wallet, they can scan the code in the scanning area of the bus electronic toll terminal to pay.

Not long ago, China expanded the use of e-CNY, with Ningbo becoming the ninth city to pilot e-CNY payments for subway rides on subway lines.

According to the data, the Digital RMB (Pilot Version) app is an official service platform for China’s legal digital currency – Digital RMB to conduct pilot projects for individual users, providing services for the opening and management of digital RMB personal wallets, and the exchange and circulation of digital RMB.

The official said that the scope of the pilot will be expanded in the future.

China has made great strides in perfecting the technical details of its digital yuan, and last week, Guangzhou’s employee housing fund could be paid through a CBDC.

The People’s Bank of China’s (CBDC) digital currency “digital yuan” (e-CNY) is growing rapidly, data shows. Since the public trial, the new fiat currency has traded a total of 87.57 billion yuan ($13.68 billion).

Recently, China’s central bank digital currency (CBDC) airdropped 30 million digital yuan to Shenzhen residents in Shenzhen, aiming to change residents’ spending habits and allow them to properly rejuvenate.

The airdrop or delivery will reportedly be via food delivery giant Meituan Dianping. Meituan-Dianping is one of the private partners helping the Chinese government extensively test e-CNY in the retail sector.