Domestic and International Implications of China’s Digital Yuan


The concept of Central Bank Digital Currency (CBDC) seems to have gained traction over the past few years and is well past the stage of conception. With around 86% of the world’s central banks engaged in CBDC related work, it is evident that CBDCs are being viewed as an important development in the Fintech domain to counter cryptocurrencies and in order to maintain monetary sovereignty. A combination of factors like shifts in payment modes and the increasing popularity of cryptocurrencies and stablecoins have led Central banks to realize that they will have to be in it to win it or else they will lag behind in the race of evolution of money. As of now, China has been able to position itself as the forerunner in this race with rounds of successful trials of its own version of CBDC, the technical term of which is known as DCEP(Digital currency/Electronic payment) and the general term known as Digital Yuan/eCNY/Digital RMB. It is not only testing the domestic prospects but also looking into using it to facilitate cross-border payments. The broader aim can be inferred as a push to internationalize RMB and challenge the dominance of USD in international trade. The fact that none of the major economies have attained what China has, in terms of development and testing of its CBDC is reason enough to be alarmed. Because its implications on the monetary and financial system can be far-reaching, not only for the region but also for the whole world. It can potentially influence the global financial system. Research and development of CBDC should be expedited in other countries as well in order to counter the first-mover advantage that China’s DCEP possesses. Only then global standards around DCEP would be set in an inclusive manner.

This paper looks into the features of China’s DCEP, its domestic prospects, and its international ambitions and scope. Although little information has been revealed about the DCEP system, multiple documents and statements about the DCEP on different occasions shed light on some of the details of the functionality of DCEP. This paper attempts to study all these sources and expound on the implicit as well as explicit implications.

Introduction to CBDC

The theoretical concept of Central Bank digital currency (CBDC) came up years ago. But presently it is being mulled over and experimented with in different ways by governments across the world. Although the particulars can vary because of many CBDCs being in the early stages of conception or experimentation, there are some underlying features of this new concept that seems to be the same in every case.

CBDC is digital money issued by the central bank which means it is a central bank liability. Instead of printing notes and minting coins, the central bank issues digital currency which is denominated in the national unit of account. To put it simply, CBDC can be called the digital form of a country’s fiat currency. One can use it to purchase and sell goods and services, send and receive it but cannot touch it, because it does not exist physically. This sounds a lot like digital payments which are already prevalent everywhere. So what makes it different? CBDCs are fundamentally different from the common electronic payment modes like Alipay and Paypal, with the core idea being that CBDC in itself is a currency and is a digital form of cash (also known as M0 in banking parlance) which can directly be used to make electronic payments without relying on a bank account; whereas Alipay and Paypal are just electronic wallets, which require users to first convert their deposits through banks for the electronic payment to function. Besides, the existing form of digital money used for payments is the liability of private banks, which must maintain reserves and deposits. Whereas, CBDCs are the liability of the government, which means that the central bank would need to back them up. Most of the countries are still not sure how to go about this new development in the Fintech domain, which can possibly have a huge impact on the payment systems across the world.

According to a recent survey by Bank for International settlements, around 60% of central banks are conducting experiments or proofs-of-concept on CBDCs, and 14% are moving towards development and pilot programmes.1 This is a considerably large number and denotes the importance being attached to CBDC by the higher echelons in central banks across the world.

What made the Central Banks around the world start researching and assessing CBDCs?

There are many factors at play here, but it has a lot to do with the rapidly increasing popularity of decentralized currencies like Bitcoin which has seen its values soar in recent years.2 Hundreds of new digital tokens have since been listed on Digital Currency exchanges (DCE). Crypto currencies and stablecoins continue to gain popularity because of their decentralized and discrete nature. Central banks see it as a hotbed for investment and store of value, which is different from conventional modes. Central banks in Sweden, Japan, Canada, and many other countries are at different stages of research on and development of central bank digital currencies. Facebook’s ambitious Project- Libra, which aims to reinvent money for the new technological age is also one important factor that has raised concerns among central banks. China, likewise views crypto currencies and digital tokens as a potential threat to its monetary sovereignty as well as the dawn of a new world financial system.3 In recent times, due to the increasing number of alternative currencies and token coming up on different platforms, maintaining monetary sovereignty has become a point of discussion around the whole world. Central banks are still on the fence about whether to ban cryptocurrencies, regulate them, or should introduce their own digital currency altogether.

China’s Ambitious DCEP

In this world of increasing cryptocurrencies and stablecoins, China’s move to promote eCNY can be seen as its bid to maintain complete authority over the monetary system. Digital payments are not something new to China. In fact, it is the largest in the world, both in terms of volume and frequency. China’s Mobile Payment Transaction Volume touched 347 trillion Yuan in 2019, which was a 25 percent increase from 2018.4 Most people in China prefer to use their digital wallets instead of cash. Even the merchants prefer to be paid via Alipay or Wechat pay. It not only saves them the hassle of giving back change but also saves a lot of time. QR codes are omnipresent in China which helps facilitate digital payments and makes the process seamless. There are very thin chances that one may find a shop in China where Alipay or Wechat Pay is not accepted. This makes it evident that China has now become a bastion of mobile payments. The declining use of Cash in China and the masses’ familiarity with electronic payments make the success of CBDC easier than in other countries. With a population that already favours digital payments, China has all along been confident of the success of its CBDC.

China’s CBDC journey started in 2014 when the People’s Bank of China(PBOC) put together a research team dedicated to digital currency.5 This was the time when China gained its first-mover advantage. It has since been engaged in extensive research which is probably the reason why China is ahead today. In 2016, the research team was strengthened and formalized into Digital Currency Research Institute, becoming the first official institution in the world to engage in digital currency research and development.6 PBOC also became the first central bank in the world to conduct technical trials of digital currency in 2017. Since then, what it has achieved both in terms of scale and advancement is unmatched as far as major economies are concerned. Their CBDC system is called Digital Currency/ Electronic Payment (DCEP) by the Chinese government. Pilot trials have been conducted in major cities and have been very successful in drawing people’s attention both at home and abroad. Major e-commerce platform was also a part of the trials and accepted digital Yuan as payments.7 The most recent, third round of trials was conducted in February 2021 during the Spring festival. Locals of Beijing were issued red packets of Digital RMB on a lottery basis. 10 million Yuan in the form of 50,000 red packets were distributed. A large number of merchants signed up to accept digital Yuan. They were provided with a unique QR code which the consumers can scan on their digital Yuan app called Shuzi Renminbi(数字人民币). It was accepted by the users and the merchants with open arms. Of course, being handed out this novel form of digital money on a lottery basis and the excitement of being the first ones to use it helped in creating the hype among the masses which the PBOC needed for a good start.

But apart from the convenience offered to the consumers, is there something in it for the merchants too? Merchants generally have to pay a merchant fee of 0.55 percent to 0.8 percent on payments they receive depending upon whether they are using WeChatPay, Alipay, or ChinaUnionPay.8 All the big names in the payment systems of China require merchants to pay this fee but that’s not the case with Digital Yuan. Being a digital fiat currency, merchants won’t have to pay any fee while receiving payments in it. This is a huge incentive for merchants and might be the single largest reason for merchants to promote the use of digital Yuan. And since it is a legal tender, merchants won’t be able to decline digital Yuan once it is officially launched nationwide.

It was noted during the trials in Beijing and elsewhere that the merchants were very optimistic regarding digital Yuan. Successive trials like these being conducted successfully in major cities in China reflects that it is on a steady path to develop DCEP and may be the first major economy to roll out its own digital currency nationwide.

PBOC is of the view that DCEP will be effective in reducing the high cost of issuing traditional paper currency and its circulation. It believes that DCEP will bring about convenience and transparency in economic transactions, reduce money laundering, tax evasion, and other forms of corruption9, and improve the central bank’s control over the money supply and currency circulation. It will also help tackle the growing problem of counterfeit currency in China. All of this mostly stands true but the flipside of DCEP also needs to be examined since it is slated to make huge changes in the monetary system of China. These features not only sets standards for the CBDCs being developed around the world but also provide a model that grants unprecedented oversight to a country’s central bank on nationwide economic activities. It can increase the authoritarian control exercised by the CPC. The most concerning aspect is the centralized nature of DCEP at the backdrop of a government that is authoritarian and wields absolute power. All of this calls for close scrutiny of the features and characteristics of DCEP. This would not only help us understand its implications but also the underlying motives of China.

Two-tier operational system to boost state-owned banks or prevent financial disintermediation?

The pilots of digital Yuan were rolled out with the help of 6 state-owned commercial banks, including the big four banks of China, namely ICBC, ABC, BOC, CCB, BoCom, PSBC.10 This was done in line with the two-tier operational system(双层运营体系shuangceng yunying tixi) which the DCEP is slated to follow. PBOC will be at the helm, responsible for creating DCEP and management of supply while the might of commercial banks will be leveraged to conduct KYC, deliver Digital Yuan to the public via digital wallets, managing their wallets, and processing payments, withdrawals and deposits. The PBOC will run three centers, an authentication center for authentication management of user identities and certificate issuance; a registration center responsible for the complete flow of the digital currency, including issuance, transfer, withdrawal, etc; big data analysis center which will be responsible for the risk management of the entire system, it will also be responsible for anti-money laundering, KYC, etc in which more risk control features can be added.11 This is a smart way tokeep all the control in PBOC while including the existing financial system and using its resources rather than building a separate system altogether. It is not yet clear how the user-end will look when a national rollout is announced, but it seems likely that the functionality of DCEP would also integrate into commercial banks’ apps, Alipay and WeChat Pay.

Last year, Ant Group’s IPO had the potential to become the world’s largest share sale but what prima facie seems to be retribution to Jack Ma’s public criticism of financial regulators, the CPC nipped it in the bud giving out a strong message that private companies will have to play by the political rules set by CPC. 12

Actually, it was due to a combination of factors which also includes CPC becoming nervous of Ant Group reigning over a huge part of the financial sector and subsequently; too much financial risk from the financial services which Ant offers to millions of ordinary people in China. Ant Group is valued at a worth far more than any of China’s Big Four state-owned banks. 13 The IPO was set to be the precursor of Ant becoming an absolute hegemon in China’s financial sector that can’t be leashed easily. This two-tier structure perhaps is the novel method devised by the Chinese government to bring state-owned banks up to speed and ensure that healthy competition exists in the country’s financial sector where one player, especially a private one, does not consolidate too much power.

Moreover, keeping the huge population and vast territory of China in mind, it would have been extremely difficult for the PBOC to ensure smooth issuance if not for the cooperation with the commercial banks. One tier structure where PBOC is the sole institution dealing with all the aspects of DCEP could have probably lead to financial disintermediation in the country. Moreover, building a parallel system would have been a waste of the existing infrastructure and human resources in this field.

DCEP will not incorporate Blockchain Technology: Is CPC wary of decentralization?

Although President Xi Jinping has emphasized on the need to accelerate the development of blockchain technology to promote innovation in 201914 yet srom what is known, China most likely will not incorporate blockchain in its design of Digital Yuan. The design of eCNY borrows only a few minor technical elements from Bitcoin and does not use the so-called blockchain technology. Cryptocurrencies such as Bitcoin are based on blockchain technology. A blockchain is a decentralized public ledger of all its transactions across a peer-to-peer network. This technology eliminates the need for a central authority because every user holds a copy of the blockchain that allows them to verify transactions. It is evident that this technology due to its decentralized nature cannot be a good fit for an authoritarian country to employ in its digital currency because it conflicts with the centralized management of the central bank. Although some openly advocate the use of blockchain in CBDC, including the former director and founder of the Digital Currency Research Institute of PBOC, Yao Qian. In his recent article, he proposed ways through which blockchain technology can be employed to keep the central bank’s authority intact. Despite the high level of security and flexibility that the blockchain platforms offer, there is little to no chance of China using it in its CBDC.

Dual-offline paymentfor better efficiency and financial inclusion

The most celebrated feature from the consumers’ point of view is the dual-offline payment(双离线支付 shuang lixian zhifu). It allows users to make payments even when offline. Although the feature of offline payment is available in Apple pay and Samsung pay in many countries, it would be the first time China would witness digital offline payment. Offline payment will even allow users to make payments while on flights, ships, underground parking, etc.15 This ease of usability can be one of the many reasons that promote user shift to DCEP from WeChat Pay and AliPay because even these two biggest digital payment giants of China don’t offer this feature yet. Not to mention, the users living in weak network areas such as rural remote villages will greatly benefit from this feature. This feature makes sure that in terms of usability, DCEP offers all the convenience it can.

Is controllable anonymity a euphemism for surveillance?

The term ‘controllable anonymity’ (可控匿名 kekong niming) has been used by the PBOC time and again to describe the privacy of the DCEP. It means that the PBOC will hold complete supervision of the DCEP but the parties of a transaction will be allowed to have anonymity in their transactions. Different levels of digital wallets can be opened according to different levels of KYC (know your customer) to meet the different payment needs of the public. The most basic Digital Yuan wallet can be opened with just a phone number. Such wallets however will have a daily limit of transactions. According to Mu Changchun, Director of the Digital Currency Research Institute of the People’s Bank of China, these wallets will suffice for the small payments of daily needs.16 Users will have to upgrade their wallets for broader functionality by registering with their national ID and name. In this way the DCEP takes care of the privacy concerns of the public which can use the most basic level wallet for its daily needs and maintain privacy and also deals with the issue of suspicious large-scale transactions for illegal purposes, effectively striking a balance between protecting the privacy and preventing illegal activities. The PBOC is of the view that while protecting a reasonable need for anonymity, it is also necessary to maintain the ability to combat criminal acts.

The PBOCis highly assertive about the level of privacy DCEP offers. According to Mu Changchun, relevant laws and regulations bar telecom operators to disclose user information to third parties such as the central bank.17 So the users who have the most basic level wallet don’t have to worry about their data being shared with anyone.

China had 79.4% mobile payment user penetration in 2018, the highest in Asia-Pacific18. Needless to say, this has only grown in recent years, especially due to Covid-19. In 2020, 62.1 billion electronic payments were made, out of which 30.7 billion were mobile transactions, which is a 73.56% increase from last year.19 Going by the data, it is evident that the number of mobile payment users is only going to increase in the future. People are increasingly relying on mobile payments for all their needs, from shopping for groceries to booking international flight tickets. With such circumstances, it seems unlikely that the users will want to have the most basic level of DCEP wallets due to its limitations on transactions. Most of the users would want to shift towards the higher level of wallets and would perhaps prioritize convenience over privacy. Hence, the PBOC will hold the reigns of huge volumes of real-time transaction data. This huge repository of data will not only help China formulate better monetary plans but will also open Pandora’s box which will help the government reassert its influence in all the monetary sectors. The data of payments can practically be used for surveillance by the CPC.

In the future, when DCEP becomes the universal system of payment for China, which it aims to eventually do someday, it can be used to tighten grip on certain individuals through limiting or seizing their wallets. The PBOC has already hinted at its intent to use DCEP as a tool to enforce party discipline and fight against corruption.20 Not to mention the much-debated social credit system of China can be linked to DCEP through which defiance can be penalized and subservience can be rewarded. These are all possibilities that cannot be overlooked. For the Chinese government, the DCEP seems to be more about control than ease of transaction. However, it should also be noted that China’s attempt to exercise control and surveillance over Digital Yuan won’t go well with its ambition to internationalize RMB and challenge the dominance of USD in the world. China is known for its authoritarianism and it has already exported monitoring infrastructure to countries such as Venezuela via its BRI network21, which is being used by the state to further its authoritarian interests. Countries with authoritarian leanings will be happy to be on board with tech that makes them more powerful. This is something that can help China’s CBDC standards further their reach in some countries but privacy laws in democratic nations won’t easily allow this kind of intrusive data collection. It would only increase skepticism in individuals and institutions on the other side of its border.

What’s in store for the Chinese population?

There is no doubt that the DCEP will bring a lot of convenience to the masses of China when it is rolled out nationwide. In an economy where cash is no longer the king, it will provide an alternative solution to the funds’ transfer barrier that currently exists between Wechat Pay and Alipay, which are the most widely used payment platforms. Offline payment will further extend the purview of digital payments to areas with poor network infrastructure. Since it is a legal tender backed by central bank liability, no merchant would be able to refuse it. In fact, the merchants would be happy to accept this payment that doesn’t require them to pay a processing fee. By offering such services, Beijing will also be able to stand up to the threat of Big tech’s increasing dominance in the financial sector. Based on the access to data that the PBOC will have, much more effective monetary policies could be made. China’s recent surge in microlending which had the potential of growing into a financial crisis22 is a fine example of what could be preempted when the reach of PBOC extends more in the time to come. PBOC’s control in the whole DCEP system will also help to keep illegal financial activities under check. All of these things are potential game-changers in the fintech domain.

It has been reported that the DCEP will be used in the Winter Olympics23, sending out a strong message about the country’s economic and technological might to the whole world. When the DCEP comes of age at the Beijing Winter Olympics in 2022, it is likely to be showcased as an achievement that none of the major economies have. China will have the opportunity to fashion itself as the pioneer of CBDC and emerging tech. This reflects that China is up to speed with the technological advancements taking place in the world and is even pioneering in a few. There could be no better occasion to send out this message other than the Olympics where countries from all around the world participate.

But in the grand scheme of things, there are many more boxes that the DCEP aims to tick. Behind the veil of convenience, lies a strong push to further institutionalize authoritarianism and surveillance. Access to data that is almost real-time, will allow PBOC to keep a close watch on debt issuance, debt repayment, investments, spending habits, etc. The big boss will always be watching, only this time the wallets are the main target. This looks like something straight out of a ‘Black Mirror’ episode portraying a high-tech dystopian future. A close watch on a person’s wallet is bound to influence his/her socio-political life. There are possibilities of people being screened into different groups based on their spending habits. This profiling will further strengthen China’s surveillance infrastructure. Citizens will be constantly conscious of where they are using their Digital Yuan and may feel the need to appear as a ‘good citizen’ through their spending habits.

There is a consensus in the higher echelons of the PBOC that digital currency will eventually replace cash. If we take this hypothesis to be true, the power in the hands of the state will increase drastically. This will be in favour of the state, hence Beijing may try to push the use of DCEP more and more. For starters, it can direct state-owned institutions to start giving out subsidies, salaries, pensions, reimbursements in the form of eCNY in tier-one cities to promote its usage. Once eCNY is formally launched, merchants will be obliged to set up eCNY POS machines because it is a legal tender then, a substitute of M0. The potential surveillance risks that the DCEP brings can prove to be a Trojan horse for the Chinese population.

DCEP can be seen as a fintech tool that can help Beijing accomplish many domestic objectives, keeping the two tech giants in check, reasserting state control over the fintech industry while providing the people a system that helps CPC to keep tight surveillance on them. All in all, China is aiming for financial stability which is the cornerstone of CPC’s political stability.

What will be its effects beyond the borders?

Recently, the PBOC joined the Multiple CBDC (m-CBDC) Bridge which aims to develop a prototype for cross-border payments with the Central Bank of the United Arab Emirates, BIS Innovation Hub, the Hong Kong Monetary Authority, and the Bank of Thailand.24 It aims to study the feasibility of cross-border payments using CBDCs and distributed ledger technology. Being the first-of-its-kind initiative, this can prove to be a big leap in terms of CBDC based cross-border payments and can perhaps contribute to setting international standards. With such advanced technology in place, the Society for worldwide interbank financial telecommunication (SWIFT)will become less relevant. Currently, cross-border payments are facilitated by the SWIFT. The dominance of USD in SWIFT’s payment system is arguably one of the major reasons for USD’s sustained status as a global reserve currency. China is aiming to change that by trying to build a parallel system. The China National Clearing Centre of the PBOC established a joint venture with the SWIFT, called Finance Gateway Information Services Co which will process cross-border Yuan payments through China’s own settlement system. Both, m-CBDC bridge and Finance Gateway Information Services Co. aim to challenge and change the current USD-dominated payments system in the coming future.

Currently, the US dollar is the most important reserve currency in the whole world, and bringing a shift from USD to RMB will be in favour of China’s push to internationalize RMB. It will be a long road for the RMB to cover if it wants to match the liquidity of USD but digital Yuan can help cover some part of the distance.

China remained the biggest trading nation of goods in 202025 even with the apparently rising anti-China sentiments due to Covid-19. It already has a large network of BRI in place to facilitate cross-border trade. China can make trade deals with them if they agree to pay using digital Yuan. It can offer incentives such as waiving off of transaction fees for BRI nations if they choose to repay loans using digital Yuan, just like it waived off transaction fees between Yuan and 12 currencies in its onshore foreign exchange market for three years.26 All of these moves point towards China’s intent to challenge the greenback while encouraging the use of the Yuan and we can expect more such moves in the CBDC domain in the future. It could not only use BRI trade links to promote the use of Yuan but also export Chinese CBDC standards. Less transparency of China’s financial system as compared to the west remains a barrier to RMB internationalization but China has had some positive developments in this area, including the inclusion of RMB in IMF’s SDR in 2016 which sent out a resonating message about the increasing integration and acceptance of the RMB in the global financial system.

These developments spell trouble for the USA because the success of DCEP in the domestic and international community will gradually affect the dominance enjoyed by USD in global payments. It stands to pose the biggest threat to U.S sanctions which is largely underpinned/rests upon by the USD dominance. Especially, the creation of a separate payment network through the m-CBDC bridge can render the U.S sanction policies ineffective to a great extent, thereby reducing its geopolitical heft and economic hard power.

In Conclusion

When it comes to emerging tech such as CBDCs, it is largely about who gets there first and the ones at the forefront not only stand a chance of winning the race but also setting standards for the future of that technology. It is alarming that other countries are far behind China in this. A large number of central banks are researching CBDCs but none of the major economies seem to be anywhere close to China at this moment. Currently, the Bahamas is the only country to have officially launched its CBDC called the sand dollar. A survey conducted by the Bank of International settlements reveals that around 60% of central banks are currently conducting experiments; 14% are moving forward to development and pilot arrangements.27 Most of these countries are still in the research phase due to many reasons including the consideration of privacy concerns of CBDCs. Democratic nations may take more time coming up with a CBDC as privacy laws have to be complied with and a consensus among many bodies regarding the model has to be reached.

Several central banks such as the Federal Reserve, the Bank of England, the European Central Bank, and the Bank of Japan are looking at how CBDCs would work28. Bank of Japan has recently started a year-long trial to test the feasibility of CBDC.29

Because of the edge that China has currently over all the other countries, it can have a greater say and can play a greater role in designing international standards around CBDCs. In fact, being the current top dog of CBDC, China has already started floating its idea of what global rules around CBDC should look like.30 Being the first issuer of paper currency in the 10th century, China now seems to be taking the lead at revamping money for the modern age.

This innovative technology holds the potential to change the global financial order on an unprecedented scale, whether it is how domestic payments are made and processed, how funds are transferred across the border, or how much data the Central banks hold about the financial transactions taking place in the country, everything is about to change. The only constant in this equation is that the wave of change will come, the variables that remain undetermined are who will be riding that wave and who will come under it.

Regional powers including India still need to cover a lot of ground when it comes to CBDC. In India, there seems to be a resistance to digital currency perhaps because the financial and banking institutions either don’t understand it completely or are not ready for it. RBI has not yet revealed any plans about its own CBDC and perhaps it is still being studied. However, RBI has acknowledged the fast-paced developments in the CBDC domain. RBI in its Report on currency and finance 2020-2021 pointed out that ‘It is imperative for the Reserve Bank to monitor global developments, explore the possibility of the need for introduction of CBDC and remain in readiness to operationalize CBDC, as and when necessary.’31 The same report also discussed the pros and cons of a CBDC in brief. This can be considered a welcome development since it shows the higher echelons of RBI are taking CBDC seriously.

India sits on an already laid out network of UPI and Aadhar which can be a great technical foundation for India’s own CBDC. As far as infrastructure is concerned, India may choose to follow the same two-tier operational system adopted by China so as to avoid disintermediation of commercial banks. Of course, the feasibility issues and privacy concerns will have to be addressed in the course of deliberation. But India must expedite its own research before the current lead of China becomes insurmountable. It is only a matter of time that China will start making its attempts to export Chinese standards of CBDC to the countries in the region including the BRI countries. This will increase the influence of China thereby diminishing India’s role in regional affairs.

After the second world warcame to an end, when the foundation of a new world order was taking shape in Bretton woods, it was decided that all the countries will peg their currency to USD because USD was still following the gold standard. That marked the dawn of the dollar hegemony which sustains till date. In all the countries today, including China, only two currencies are considered the most liquid, their own currency and the USD. This is the level of acceptability and flexibility that the USD provides which basically makes it the de facto global currency. USD still makes up more than 60% of global foreign exchange reserves.32 USD draws its power from the might of the American economy, which is the largest in the world, as well as America’s political stability and sturdy monetary policy. These are some of the many factors which anchor the value of USD. The developments in the Fintech domain in China as well as the increasing popularity of cryptocurrencies could potentially threaten the heft of USD. But before the Yuan can position itself as an alternative in front of the world, it will have to go through varying geopolitical litmus tests including the ones in which USD has fared well so far.


  1. Boar Codruta and Andreas Wehrli, ‘Ready, Steady, Go? – Results of the Third BIS Survey on Central Bank Digital Currency’, BIS Papers, 114, 2021, 77–82.
  2. John Edwards, ‘Bitcoin’s Price History’, Investopedia, 2021 [accessed 22 March 2021].
  3. RAYMOND ZHONG, ‘中国加密货币计划的强大盟友:“老大哥”’, 纽约时报中文网, 2019 [accessed 22 March 2021].
  4. ‘• China: Mobile Payment Transaction Value 2019 | Statista’, Statista, 2021 [accessed 22 March 2021].
  5. ‘中国人民银行数字货币研讨会在京召开’, The People’s Bank of China, 2016 [accessed 22 March 2021].
  6. ‘观察丨央行数字货币如何影响你我————要闻——中央纪委国家监委网站’, Central Commission for Discipline Inspection, 2020 [accessed 22 March 2021].
  7. Arjun Kharpal, ‘China’s Digital Yuan: What Is It and How Does It Work?’, Cnbc.Com, 2021 [accessed 22 March 2021].
  8. Svitlana Varaksina, ‘China Payment Systems Guide: Alipay vs WeChat Pay vs UnionPay’, Mind Studios, 2019 [accessed 27 March 2021].
  9. ‘观察丨央行数字货币如何影响你我————要闻——中央纪委国家监委网站’.
  10. ‘数字人民币“可控匿名”回应隐私担忧-新华网’, Xinhua, 2021 [accessed 4 April 2021].
  11. 杨晓晨 and 张明, ‘【深度】央行数字货币的五个“能”与“不能”|央行_新浪财经_新浪网’, Sina, 2020 [accessed 9 April 2021].
  12. Raymond Zhong, ‘Why China Halted Ant’s I.P.O., Dealing Jack Ma a Blow – The New York Times’, New York Times, 2020 [accessed 8 April 2021].
  13. George Calhoun, ‘Why China Stopped The Ant Group’s IPO (Part 2): Ant’s Dangerous Business Model’, Forbes, 2020 [accessed 8 April 2021].
  14. ‘习近平在中央政治局第十八次集体学习时强调把区块链作为核心技术自主创新重要突破口加快推动区块链技术和产业创新发展’, Xinhua, 2019 [accessed 23 March 2021].
  15. ‘中纪委:央行数字货币如何影响你我的日常生活?’, Sina, 2020 [accessed 28 March 2021].
  16. ‘数字人民币“可控匿名”回应隐私担忧-新华网’.
  17. ‘数字人民币“可控匿名”回应隐私担忧-新华网’.
  18. . Daxue Consulting, Payment Methods in China: How China Became a Mobile-First Nation, 2020 [accessed 6 April 2021].
  19. 2019年第四季度支付体系运行总体情况, The People’s Bank of China, 2019 [accessed 6 April 2021].
  20. ‘观察丨央行数字货币如何影响你我————要闻——中央纪委国家监委网站’, Central Commission for Discipline Inspection, 2020 [accessed 7 April 2021].
  21. Laura Vidal, ‘Venezuelans Fear “Fatherland Card” as Form of Social Control’, 2018 [accessed 14 April 2021].
  22. Daniel Ren, ‘China Bans Microlenders from Offering Consumer Loans to College Students to Curb Over-Lending’, South China Morning Post, 2021 [accessed 14 April 2021].
  23. ‘央行:数字人民币封闭测试不会影响人民币发行流通_滚动新闻_中国政府网’, 2020 [accessed 9 April 2021].
  24. ‘Press Release: Central Banks of China and United Arab Emirates Join Digital Currency Project for Cross-Border Payments’, Bank for International Settlements, 2021 [accessed 11 April 2021].
  25. ‘China Remains World’s Largest Trading Nation in Goods: Customs – CGTN’, CGTN, 2021 [accessed 10 April 2021].
  26. Amanda Lee, ‘China Omits US Dollar from Forex Trading Fee Waivers in Bid to Bolster Yuan’, South China Morning Post, 2020 [accessed 11 April 2021].
  27. Codruta and Wehrli.
  28. Harry Robertson, ‘Global Central Banks Are Pressing Ahead with Testing Digital Currencies, with China Leading the Way | Currency News | Financial and Business News | Markets Insider’, Business Insider, 2021 [accessed 14 April 2021].
  29. Codruta and Wehrli.
  30. Tom Wilson and Marc Jones, ‘China Proposes Global Rules for Central Bank Digital Currencies | Reuters’, Reuters, 2021 [accessed 14 April 2021].
  31. Shaktikanta Das, ‘Report on Currency and Finance 2020-21 – Reviewing the Monetary Policy Framework’, Reserve Bank of India, 2021, 55 [accessed 14 April 2021].
  32. Anshu Siripurapu, ‘The Dollar: The World’s Currency | Council on Foreign Relations’, Council on Foreign Relations, 2020 [accessed 14 April 2021].

Written by Raj Gupta is currently Masters Student, CCSEAS, Jawaharlal Nehru University, New Delhi and published originally in and being reproduced with due permission from Vivekananda International Foundation, Delhi duly acknowledging their copy rights.

Leave a Reply

Your email address will not be published. Required fields are marked *