Written by Hazel J. Greene, Senior Analyst

China’s digital yuan, the central bank’s digital currency (CBDC), has witnessed remarkable progress as it continues to gain traction. According to the Chinese central bank governor, Yi Gang, the digital yuan has facilitated nearly $250 billion in transactions within the past one-and-a-half years.

During a conference in Singapore on July 19, Yi Gang shared that the CBDC had transacted 1.8 trillion yuan by the end of June. Since its rollout in January 2022, the digital yuan pilot has recorded an impressive 950 million transactions, involving roughly 120 million wallets. These figures reflect an average transaction amount of approximately $250 billion. Furthermore, Yi Gang revealed that around $2.3 billion (16.5 billion digital yuan) was in circulation at the end of June.

Despite the accelerated adoption rate and increased use cases, the digital yuan only accounts for 0.16% of China’s monetary supply, as reported by Reuters on July 19. This suggests that while the CBDC is gaining popularity, its overall adoption remains modest in relation to China’s population of over 1.4 billion people.

The digital yuan’s utility has mainly been observed in domestic retail payments, although a few trials have taken place in Hong Kong. The Bank of China (Hong Kong) recently explored a cross-border payment scheme for its customers, conducting a pilot at selected retail stores in the city. This marks the third cross-border trial of China’s CBDC in Hong Kong, aiming to promote its cross-border payment applications.

China has actively promoted the adoption of its CBDC since launching the pilot program last year. For instance, the Bank of China (Hong Kong) initiated a program in Hong Kong that incentivized customers to set up a Bank of China e-CNY (digital yuan) wallet. By doing so, customers received $14 (100 yuan) that could be spent at the Hong Kong supermarket chain, U Select.

In January, the Chinese central bank introduced smart contract functionality to the digital yuan, enhancing its versatility. This feature was integrated into the Meituan app, a popular Chinese platform facilitating retail and food delivery services. The Smart Contract feature enables users to place orders and pay with their e-CNY wallets. It then utilizes keyword search to identify ordered items, with users who purchase items from the listed keywords being eligible for raffle draws to win prizes.

These initiatives have successfully fueled the adoption of China’s digital yuan. However, the $250 billion in CBDC transactions represents a fraction of the transaction volume processed by prominent public blockchains. For instance, Bitcoin, a public blockchain, processes thousands of transactions daily and handled $8.2 trillion in transactions in 2022 alone, according to Finbold’s report.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.