When China launched its digital currency, the digital yuan, also known as e-CNY, it was expected that citizens would eagerly adopt the new option to the country’s currency. However, recent reports suggest otherwise, particularly among Hong Kong residents.
On February 18, the country’s first digital yuan hard wallet dispenser machines were installed in Luohu, a district of Shenzhen. As of February 26, only 625 wallets have been dispensed, and they were reportedly demanded by visitors on the island.
The Bank of China and the government have made efforts to incentivize citizens with a 20% discount on purchases made with the card from 1,400 local vendors. The initiative’s goal to issue 50,000 digital yuan hard wallets by March 30 seems unlikely to be met.
Other efforts from the Shenzhen government include offering 100 million yuan (US$14.5 million) in digital yuan economic recovery support after the lift of Covid-19 restrictions.
The low usage of China’s CBDC is not limited to Hong Kong; other provinces in China have also recorded a low usage rate. Although no specific factor has been pointed to, it is believed that e-CNY is not strong enough to compete with other established payment services like WeChat Pay and Alipay.
An iResearch report shows that Alipay held 55.6% of the third-party mobile payment market share in the second quarter of 2020, while WeChat Pay held 38.8%. In the same year, a Brookings Institution report claimed that Alipay had 1.2 billion monthly users, while users of WeChat Pay exceeded the 1 billion mark in 2018.
After crossing 100 billion yuan from cumulative transactions in October 2022, two years after its introduction, the government and the People’s Bank of China (PBOC) have made numerous efforts to promote the acceptance and usage of the e-CNY by its citizens.
The PBOC’s efforts have even led to a former member of the Monetary Policy Committee, Huang Yiping, asking the country to rethink its proposed ban on crypto. The government had, in September 2021, declared all cryptocurrency trading illegal, citing its negative impact on the financial and economic system and its association with criminal activity.
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