Digital Yuan Gets Smart Contract Functionality 

Digital Yuan Gets Smart Contract Functionality

China’s digital currency has enabled smart functionalities for a wide range of use cases. The e-CNY can be now used to conduct transactions without internet connectivity, purchase goods and services on e-commerce platforms and buy securities from apps of local brokers.

The People’s Bank of China (PBOC) has enabled smart-contract functionality on its central bank issued digital currency (CBDC), the digital yuan or e-CNY. The feature was launched on the Meituan app, China’s largest e-commerce platform for retail and food delivery services.  

Last year, the central bank conducted a pilot program in collaboration with payments giants WeChat Pay, and Meituan to test retail capabilities of digital yuan. Meituan users could link their e-CNY wallets to the mobile app and use the digital currency to book hotels, taxis and order and pay at restaurants. The program was initiated to increase wide-scale adoption of the CBDC. 

China is the global leader when it comes to CBDC development. Beijing began developing its digital currency back in 2014, and started testing the tokens in the retail sector in 2020. According to Zou Lan, Director of Financial Markets Department at PBOC, in 2021, more than $13 billion worth of transactions were conducted using the CBDC. Nearly 10 billion merchants in the country are currently using e-CNY wallets. 

All Meituan users can now purchase items on the app and pay using their e-CNY wallets. When customers place an order, the app will trigger a smart contract containing a list of keywords generated on a daily basis. If a user buys an item that was on the keywords list for the day, they will enter a raffle draw that can win them a ‘honbao’ containing prizes of up to 8,888 yuan ($1,312). Honbao or the “red envelope” are small packets used for gifting money during the Chinese New Year as a gesture of good luck. Lucky winners of the daily draw will get a portion of the 8,888 yuan sent to their e-yuan wallet by the smart contract. The Chinese New Year falls on January 22. 

Last month, in an effort to boost CBDC adoption before the New Year, PBOC released a feature on the e-CNY app allowing users to send digital hanbao. 

On January 16, the China Securities Journal reported that users could now buy securities using e-CNY on the Soochow Securities mobile app. Last week, the central bank added a Tap to Pay function on the digital yuan app that can be used without internet connectivity. The feature allows users to set a limit on how much can be paid and how many times when their devices are switched off or lack connection. Tap to Pay, which is currently available on Android devices will be expanded to other operating systems in the future. 

There are conflicting reports on the digital yuan adoption numbers. While official figures from PBOC say transactions using e-CNY reached a milestone of 100 billion yuan ($14 billion) in October 2022, a former official of the central bank admitted that e-yuan usage in the economy has been relatively low and inactive. On January 10, the PBOC published its first ever digital yuan circulation report which said the CBDC accounted for 0.13% of the 10.47 trillion yuan ($1.54 trillion) that was in circulation at the end of 2022. 

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