China's e-CNY, piloted in 2019, has positioned the country as a leader in central bank digital currencies (CBDC). Growth has been impressive, especially following the launch of its mobile app in 2022. By June 2023, the digital yuan had been used for 950 million transactions, amounting to some Rmb1.8 trillion ($253 billion).
However, domestic penetration remains very low, with e-CNY representing a mere 0.16% of cash in circulation, according to PwC. WeChat Pay and Alibaba's Alipay dominate the e-payment space, together accounting for 954 million users and more than 95% of the mobile wallet market in China.
There may be little incentive for users to switch to e-CNY, unless, of course, they find themselves in a blackout and need to pay for an emergency candle, as digital currency can be used offline.
But don't write off the digital yuan just yet. When it comes to cross-border transactions, it could be a game-changer.
Political tensions
Last week, the Bank for International Settlements (BIS) announced that mBridge, a China-led multi-CBDC platform designed for cross-border transactions, has entered the minimum viable product stage.
The move coincides with Saudi Arabia, the world's largest oil exporter, joining the project, potentially signalling another move away from the dollar in global oil trading.
US-based
