The People’s Bank of China (PBoC) has announced that its central bank digital currency (CBDC) has seen transaction volumes surpass $14 billion since the pilot began in 2020. The central bank made the disclosure via its official WeChat page and revealed further plans for expansion.
Nearly 6 million merchant stores support the digital yuan as a means of payment, while state institutions are leaning on the CBDC to improve their operations, according to the central bank announcement.
“Multiple e-government service platforms have opened digital renminbi payment services, supporting online and offline channels to handle various public utility payments, using digital renminbi to issue tax rebate funds for monthly medical insurance payment, funds for helping people in need, and specialized, special, and new enterprise support funds, etc.,” read the PBoC’s disclosure.
A keen example of the increasing adoption of the digital yuan is its deployment in the transportation sector in the cities of Xiamen and Guangzhou. Furthermore, the PBoC has been steadily expanding the number of provinces participating in the trials.
In January, the figure stood at around $13 billion, and in seven months, the digital yuan was able to add around $1 billion to the tally. The deployment of the CBDC in global sporting events like the Winter Olympics and the 2022 Asian Games may have played a role in the increase in transaction volumes for the digital yuan. A planned collaboration into cross-border payments using CBDCs with next-door neighbors Hong Kong could lead to even larger adoption rates for the digital yuan.
The journey is not a bed of roses
While it appears as though the PBoC is having a smooth ride in the development of CBDC, there have been some challenges along the way. Perhaps, the most obvious stumbling block has been privacy issues, with critics slamming the project as one big endeavor to spy on citizens.
Some United States Congressmen have presented a bill to prevent mobile applications from hosting the digital yuan on the grounds that “the Chinese Communist Party will use its digital currency to control and spy on anyone who uses it.”
However, China has strongly refuted the allegation, saying it will guard user data and prevent its misuse. Mu Changchun, head of the PBoC, said that although an anonymous CBDC is not feasible at the moment, “the protection of user privacy by digital renminbi is the highest among the current payment tools.”
Other challenges faced by the digital yuan include grappling for market share with payment platforms like WeChat Pay and AliPay, while the risk of shadow banking and subsidization hangs like a dark cloud over the CBDC.
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