Let’s Start With What China’s Digital Currency is Not

The e-CNY has many names and has captured imaginations, but it's early yet


March 8, 2022

Article Banner Picture


March 8, 2022

This article by Lorand Laskai introduces a growing body of DigiChina work on China's digital currency efforts and their relationship with recent blockchain initiatives. Student editors enrolled in our first DigiChina Newsroom course at Stanford University in Spring 2021 initiated the effort, and Laskai and Associate Editor Johanna Costigan brought it to publication. –Ed.

Over the past year, the e-CNY (数字人民币, shùzì rénmínbì) has become a source of western concern about China's growing digital influence in financial technologies. In December, the United Kingdom’s spy chief sounded the alarm over the digital currency, calling it a potential vector for Chinese global surveillance. In a recent letter to the Biden administration, Senator Pat Toomey, R-Pa., and several other senators expressed concern that the United States was ceding a “first mover advantage” to China. China’s Ministry of Foreign Affairs hit back, chiding the U.S. lawmakers for “making trouble” out of China’s digital currency.

What is the e-CNY? China’s digital currency goes by many names: the digital yuan, the e-Renminbi (e-RMB), the Digital Currency/Electronic Payment (DC/EP) project, and most commonly today, e-CNY. Announced by the People’s Bank of China (PBOC) in 2017, the e-CNY is China’s attempt to develop a digital fiat currency, widely referred to as a central bank digital currency (CBDC). It’s clear that the Chinese Communist Party has big plans for the e-CNY, having emphasized the role of a digital currency in its long-term plan for the economy through 2035. However, despite the hype, the e-CNY—what it is, what makes it unique, why it’s important—remains little understood. 

At the moment, it can be helpful to start with what it is not: 

For one, the e-CNY is not yet fully functional. A pilot version of the e-CNY wallet debuted in app stores ahead of the 2022 Winter Olympics in Beijing—an early public roll-out for the digital coin—and briefly topped the charts for the most downloaded free app on Apple's China App Store. However, the service is still limited to 10 cities as part of its initial launch pilot, and its usage since the Olympics has been extremely modest. Moreover, its ability to clear transactions—a key test for a payment service—is considerably lower than China's private sector digital payment incumbents, AliPay and WeChat Pay. For the time being, the digital yuan has nowhere near the scale or functionality to have widespread domestic, much less international, appeal.

Second, the e-CNY is not a cryptocurrency. As Eli MacKinnon and Mikk Raud explain, the e-CNY is separate and distinct from the Blockchain-based Service Network (区块链服务网络), China’s ambitious project to create a state-backed distributed ledger infrastructure—even if the two projects might work together in the future. Unlike Bitcoin and other cryptocurrencies, e-CNY does not operate through a blockchain-based decentralized ledger; rather, it is a centralized operation, issued and supervised by the PBOC. At this technical level, the e-CNY is not fundamentally different from other online digital payment options in China such as AliPay and WeChat.

That does not mean the e-CNY lacks any new characteristics. As Eli MacKinnon writes in our Lexicon entry on “controllable anonymity,” the e-CNY's designers are building systems that promise to shield user identities in some contexts while still providing law enforcement and security agencies access when they demand it. Judging by PBOC’s patent trail, it’s possible the e-CNY might one day play a role in a Chinese cryptocurrency industry, perhaps serving as the exclusive stablecoin for Chinese cryptocurrencies. However, given China’s complete ban on cryptocurrency trading and mining, that possibility remains remote. 

Finally, the e-CNY is not part of a concerted strategy to internationalize the renminbi—at least not yet. The PBOC’s efforts to publicize the e-CNY have a notable international bent, including encouraging athletes and foreign visitors to adopt the e-CNY wallet at the 2022 Olympics. International observers have speculated that the e-CNY could be a gamble to challenge supremacy of the U.S. dollar in finance and commerce. However, the overall landscape of capital flows in China makes e-CNY an unlikely tool for RMB internationalization. China maintains robust capital controls, which are responsible for keeping renminbi in the country. As Eli MacKinnon writes, a 2021 PBOC deal with the international banking service SWIFT has no specific tie to e-CNY so far.  While PBOC is experimenting with several international pilots involving the e-CNY, these small-scale applications will not solve the larger problem of China’s capital controls. 

What, then, is the e-CNY, and why is it notable? The e-CNY is a digital version of China’s fiat currency, the renminbi (RMB, or CNY in the ISO standard). It is the world’s first digital currency issued by a major central bank—which, as Martin Chorzempa of the Peterson Institute for International Economics writes, is “somewhat technical and considerably less exciting than the hype may seem to suggest.” Still, as Yaya Fanusie of the Center for a New American Security told Mikk Raud in an interview, "It is unclear how users will respond as the trials continue, but the government is certainly laying the groundwork for wide-scale adoption of e-CNY throughout the economy." Other central banks are experimenting with digital tokens as well. But the PBOC is moving faster, which might have implications for global standard-setting. 

Below, DigiChina offers a list of our own resources on the digital yuan and it’s development, as well as selected resources elsewhere on the web that help us make sense of China’s moves in digital currency. This list may be updated from time to time.

DigiChina Resources

Other Resources

Ananya Kumar, A Report Card on China’s Central Bank Digital Currency: the e-CNY, Atlantic Council (Mar. 1, 2022)

Working Group on E-CNY Research and Development of the People’s Bank of China, Progress of Research & Development of E-CNY in China (Jul. 2021)

Robert Greene, What Will Be the Impact of China’s State-Sponsored Digital Currency?, Carnegie Endowment for International Peace (Jun. 1, 2021)

Izabella Kaminska, Is the central bank panic about the PBOC coin justified, Financial Times (Apr. 19, 2021)
Martin Chorzempa, Testimony Before the US-China Economic and Security Review Commission—China’s Pursuit of Leadership in Digital Currency (Apr. 15, 2021)