China’s Digital Yuan Adds Smart Contract Capabilities

China’s Digital Yuan Adds Smart Contract Capabilities

  • China is leading the charge in the development of CBDCs, with its digital currency, the e-CNY, being used in real-life scenarios.
  • The e-CNY has been upgraded with smart contract functionality and a range of new uses.
  • Last year, the e-CNY wallet app was released with a feature allowing users to send digital red envelopes ahead of the Lunar New Year to boost adoption.

The digital yuan, also known as eCNY, has received an upgrade with smart contract functionality, according to a report by local cryptocurrency media outlet 8btc. 

The function was launched ahead of the Lunar New Year on the Meituan app, a Chinese app offering retail and food delivery services. When users place an order and pay with their e-CNY wallet, a smart contract triggers and searches for keywords and purchased items in their order. 

If a user buys something on the list of keywords for the day, they are entered into a drawing to win a share of the 8,888 yuan (worth a little over $1,300 USD) contained in a “red envelope,” known locally as hongbao.

China is leading the charge in the adoption of CBDCs, as it makes major inroads in the digitalization of the world economy and a higher demand for digital payments. 

More than 90% of central banks have already begun research on CBDCs, and China’s digital iteration of the digital yuan, or e-CNY, has showcased potential to make a difference in the real world. The adoption rate is increasing steadily, with users seeing real-life benefits.

China Leading the Way in CBDC Development

Alongside the smart contract feature, China Securities Journal reported that e-CNY was used to buy securities for the first time. Investors can also use the CBDC to buy securities with the mobile app for Soochow Securities, a local brokerage firm. 

The digital yuan wallet app also received an update, allowing users to make contactless payments using Android phones even if their device is without internet or power.

While other nations such as the United States, Russia, Europe, and the United Kingdom are still at the preliminary stages of CBDC implementation, China’s progress serves as a promising example of the potential benefits of CBDCs. 

The Federal Reserve, in coordination with a group of private banking firms, has launched a 12-week digital dollar pilot project, but concerns over the concept of financial freedom and the cost of implementation continue to be debated as the process develops in 2023.

On the Flipside

  • The adoption rate of China’s digital yuan, or e-CNY, is increasing steadily, but there are concerns about the low usage and inactivity of the e-CNY according to former People’s Bank of China Official, Xie Ping.
  • Although China has tried to ban mining and other crypto activity, it is also one of the leading countries in terms of widespread crypto adoption.

Why You Should Care

The success of China’s digital yuan, or e-CNY, showcases the potential benefits of CBDCs. It also raises important questions about the role of central banks in the digital economy and the implications for financial freedom and privacy.

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