By: The Economist
May 3, 2021
WITH A FEW taps on her phone, Lu Qingqing, a 24-year-old office worker, leapt into the monetary future. She was one of 50,000 people in the city of Shenzhen selected late last year for a trial of China’s digital currency, officially called eCNY. She downloaded an app, received a gift of 200 yuan ($30) from the government and went shopping for books. The app’s display showed a traditional banknote and her balance, which ran down as she made purchases. “It felt like real money,” she says.
Legally, it is as real as hard cash. All the money in an eCNY app, offered by one of six commercial banks, is backed by an equivalent amount deposited at the People’s Bank of China. Just as the central bank issues and stands behind any paper yuan circulating in China, so does it guarantee eCNY. If, say, the commercial bank that made Ms Lu’s digital wallet went bust, her eCNY—linked to her personal-identity number—would be transferred to a new wallet.
Central banks worldwide are considering issuing digital versions of notes and coins. Although China will not be the first (that honour goes to the Bahamas), it is the most important launching ground.