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Northeast Asia

China races ahead with digital currency

A global competition is under way to define the future of money – and the bet is overwhelmingly on China to get there first.

People's Bank of China Governor Yi Gang Exclusive Interview
Central bank governor Yi Gang is helping to shape China’s digital currency. Source: Bloomberg via Getty Images

While the US Federal Reserve, the European Central Bank and Bank of Japan “study” the mechanics of issuing a new form of cash, China has pulled ahead and has been testing its digital Yuan since April 2020.

The initial pilot programme involved the mainland cities of Chengdu, Shenzhen and Suzhou, as well as the more recently created Xiong’an New Area, and has expanded rapidly. Next, the People’s Bank of China (PBoC) roped other parties into the process, including fintech pioneers Ant Group and Tencent Holding, e-commerce firms Alibaba Group Holding and, and then Hong Kong. The country is now racing to perfect its e-CNY (or Digital Currency Electronic Payment, to give it its more formal name) in time for athletes and foreign visitors to use during the 2022 Winter Olympics in Beijing.

Yet the prospect of Beijing taking the lead in rewriting the rules of legal tender has struck fear into the hearts of plenty of world leaders and investors, many of whom have raised their concerns publicly over the implications – whether for financial hegemony or the role of the US dollar globally.