China’s push to become the world’s central bank digital currency (CBDC) leader continues to face hurdles, with the latest being a failed campaign to push the digital yuan in Hong Kong.
In a bid to promote the digital currency beyond China, the state-owned Bank of China installed machines at the Lo Wu border crossing between Hong Kong and Shenzhen, China. Users could obtain physical digital yuan cards to make payments across the city-state through the machines.
Bank of China partnered with Octopus Cards Limited on the initiative, with Hong Kongers able to top up their digital yuan cards through an Octopus card—Hong Kong’s predominant cashless payment system.
China is offering a 20% discount on purchases in over 1,400 stores across the state to lure users.
However, as local media reports, the physical digital yuan cards have failed to take off. Four days after they launched, only 625 Hong Kong residents had obtained them.
The low uptake is an even bigger blow given Hong Kong’s high credit and debit card use. About half of all payments in the state are through cards, twice as much as through second-placed digital wallets.
China’s central bank, the People’s Bank of China (PBoC), is reportedly exploring other ways to push the digital yuan in Hong Kong. This includes integrating the CBDC wallet into SIM cards so that visitors to the city-state can tap into the digital yuan seamlessly.
PBoC has continued to push the digital yuan for years now. In that time, it has given away hundreds of millions of the CBDC to users to stimulate usage, but to little effect. In its January report, the central bank revealed that only $2 billion worth of digital yuan was in circulation, accounting for a mere 0.13% of the $1.51 trillion in reserves held by the bank.
Just as with other CBDCs, including the Nigerian eNaira, most users have complained that the digital yuan isn’t any easier or more convenient than the existing digital payment infrastructure.
“For end users, using the e-CNY wallet is like you have to manage an extra bank account. It doesn’t give [users] many benefits nor convenience,” commented Yifan He, the CEO of Red Date Tech., the company behind the Chinese government’s Blockchain Service Network.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
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