The People’s Bank of China (PBoC) is looking for new ways to make the digital yuan the primary means of making payments in the country.
According to the South China Morning Post, the latest trick in the PBoC’s playbook is borrowing a leaf from AliPay’s red packet feature, which bears similarities to the centuries-old Chinese tradition. Traditionally, Chinese residents send red cash-filled envelopes to family and friends with good wishes ahead of the year.
The Chinese central bank’s addition of the feature in the central bank digital currency (CBDC) mobile app will allow customers to send “red packages” electronically to their loved ones. Experts believe that the new feature will help PBoC’s attempts to encourage the CBDC app download and usage as it tries to starve off competition from other payment methods.
Users of the digital yuan can send red packets to a person of their choice or set up a draw to allow a random individual from the pool to receive the funds. Customization features have also been added to the red packet, allowing users to choose the kind of wishes they want to be displayed, including birthday and happy new year wishes.
Since the launch of the app nearly 12 months ago, the use of the app appears to have plateaued after the initial excitement. Digital yuan transaction volumes exceeded the $14 billion mark in October, a 14% increase from the 12 billion it achieved by the end of 2021.
So far, 261 million users have downloaded the digital yuan mobile app, which pales in comparison to the over 1 billion users of AliPay. Despite expanding the CBDC trial to new regions, experts believe that the PBoC faces an uphill climb in the quest to wrest a sizable market share from WeChat and AliPay.
Not losing hope
Despite the paltry figures surrounding the digital yuan, the PBoC remains confident that the CBDC will replace notes and coins. The central bank has confirmed that it is exploring the possibility of using the CBDC for cross-border transactions following a successful pilot with the Bank for International Settlements (BIS).
Furthermore, the PBoC is optimistic that a full-scale launch of the CBDC could trigger another wave of interest with foreigners given access to the digital yuan. However, attempts to introduce the digital yuan wallet to the United States are facing strict Congressional opposition, with critics saying that it is a tool used by the Chinese government to spy on citizens.
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