China is pushing for its digital yuan to be more widely distributed and for consumers to have more exposure.
The Winter Olympics are drawing near, slated for early 2022 — and that’s when Beijing is due to roll out its central bank digital currency (CBDC) nationally.
Read more: China Seeks Gold Medal for Digital Yuan Rollout Ahead of Winter Olympics
But of course, acceptance is key — not just on the part of the consumers themselves, but the businesses that serve them, too.
The Financial Times reported this week that China is boosting its efforts to get merchants to accept the CBDC. That includes McDonald’s, which has been in the midst of trialing the digital offering at 270 outlets. The government reportedly wants those efforts to be broadened by the fast food giant; the FT also noted that pressure has been ramping up for CBDC rollouts at firms such as Nike and Visa.
Though these are of course some household U.S. names in brick-and-mortar and eCommerce, observers pointed out to the FT that the pressure extends to domestic companies too.
But the government’s efforts bring up some key questions about the rollout. Beyond the obvious and understandable desire to have scale in place, and to have some ability to demonstrate the efficacy of the digital yuan, China also seems intent on crowding out any other digital currency options for everyday commerce.
As we noted last month, the announcement that all cryptocurrency-related transactions, including bitcoin, are illegal sets the stage for the CBDC to be launched without any real competition.
Read here: China ‘Blanket’ Crypto Ban Paves Way for CBDCs
In doing so, China’s central bank can maintain its dominance over the monetary system and over monetary policy. The (accelerated) evolution toward cashless interactions, underpinned by the CBDC, would be a controlled one.
The Privacy Concerns
Privacy concerns, of course, are and will be important to address. As the People’s Bank of China noted in a white paper detailing the development of the digital yuan, the bank champions the concept of “managed anonymity.”
Under the principle of managed anonymity, the bank advocated “anonymity for small value” and that information be “traceable for high value,” and said that the digital yuan system “collects less transaction information than traditional electronic payment and does not provide information to third parties or other government agencies unless stipulated otherwise in laws and regulations.” The protections will also, the document stated, safeguard against “arbitrary information requests.”
We note that the information requests referenced above might refer to those issued by third parties. And though the smaller value transactions would be protected, it stands to reason that as the values of the payments increase, the government’s scrutiny would, too. Ahead of a wider rollout there’s no real evidence yet of how anonymity and privacy protections would fare in real-world situations.
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