As the Lunar New Year approaches, China is making a major foray into offline payments, from smart contract features, with the adoption of its central bank digital currency (CBDC), or digital yuan.
There is talk about CBDCs and their implementation. Some nations, such as China, are leading the charge, while other giants, such as the US, Russia, Europe and the UK, are still in their infancy.
The increase in traction is directly related to the digitization of the world economy and the high demand for digital payments. More than 90% of central banks have started researching CBDCs.
The Federal Reserve and a group of private banking firms launched a 12-week digital dollar pilot project. But there are still concerns about the concept of financial independence. Development of the implementation continues in 2023. From Europe to Russia, everyone has taken significant steps to speed up the process. But at what cost?
China’s digital iteration of the digital yuan, or e-CNY, demonstrated some potential to make a difference in the real world. The adoption rate continues to grow, with users seeing real-life benefits. So, what makes this innovation so attractive?
Understanding real life use cases
China released its latest digital yuan app for iOS and Android users last year, causing a massive stir in more than 20 cities across the country. Earning a score of 4.4 out of 5 on the App Store, the app continues to top the charts, with over 250 million users onboard.
Several factors have aided in its rise. For example, users link multiple bank accounts to one app, meaning they don’t need a central bank digital currency app for each bank, but rather one app and multiple banks.
Secondly, the app allows QR code payments, which is already being used by millions of Chinese citizens. Many other features will also be added this year.
The question is whether the e-CNY app brings anything new to the game. Alipay and WeChat Pay already have great apps; If the e-CNY is going to take off, it has to offer something new.
new features installed
e-CNY will use smart contract utilities to allow securities purchases and payments to be made offline. Crypto news agency 8btc revealed some of the new features, which include retail and food delivery services.
“The smart contract will automatically identify the information in the order. Suppose the order contains ‘keywords’ in the merchant/commodity name. In that case, the system will automatically trigger the smart contract, split the daily red envelopes (hongbao) 8,888 yuan (about $1,300), and deliver the red envelope to the agreed wallet,” 8btc explained.
These red packets are given around Chinese New Year as a gesture of goodwill. This is, indeed, a significant step towards mainstream adoption. When the feature was launched last Chinese New Year, users flooded the network.
Chinese brokerage platform Socho Securities has partnered with the Bank of China to launch a digital yuan payment function for its wealth management products.
Users can access the CBDC to receive securities through a mobile app. Furthermore, users of the digital yuan payment app will also be able to use it offline – an important feature that could boost engagement.
A major factor limiting adoption is the question of privacy concerns. Will the advent of CBDC completely restrict user movement? Only time will tell.
These necessary steps will support the operation of the digital yuan despite hiccups, such as privacy concerns. Furthermore, as stated above, other countries have fast-tracked their CBDC operations compared to arch rivals. That said, will the arrival of a CBDC completely restrict user movement? Only time will tell.
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