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Digital Yuan: China’s Trojan Horse in Your Wallet



Digital Yuan

Key Takeaways

  • The Digital Yuan is China’s central bank digital currency (CBDC) that aims to replace cash and end the dominance of Alipay and WeChat Pay.
  • It provides the Chinese government with unprecedented oversight and control over money flows, transactions, and personal data.
  • The e-CNY wallet has in-built surveillance features and programmable controls over how the money is spent.
  • It allows real-time tracking of all transactions, while bypassing the existing banking system.
  • The Digital Yuan threatens to undermine the US dollar’s status as the de facto global reserve currency.

What is the Digital Yuan?

The Digital Yuan, officially called the e-CNY, is China’s sovereign digital currency issued by the People’s Bank of China (PBoC). It was launched in 2020 and is at various pilot testing stages across several cities in China.

The e-CNY is a centralized, digital form of the Chinese Yuan that is fully regulated by the PBoC. It is pegged 1:1 with the paper Yuan but exists purely in digital form, stored and transacted using an e-wallet app.

How the Digital Yuan Works


The e-CNY relies on a centralized ledger run by the PBoC, rather than a decentralized blockchain. Users download a mobile wallet app to store, send, and receive the Digital Yuan.

Transactions occur directly between users bypassing intermediaries like banks or payment processors. The PBoC validates and processes all transactions in real-time.

User identities are tightly verified for wallet activation. The system can enforce conditional and programmable controls over transactions at the discretion of the central bank.

Why China is Pushing the Digital Yuan


China aims to become the first major economy to launch a CBDC. The primary goals include:

  • Replace cash: The e-CNY will replace physical banknotes and coins. This improves monetary control and policy effectiveness for the central bank.
  • Increase surveillance: The underlying technology allows unprecedented oversight and tracking of money flows in the economy in real-time.
  • Counter Alipay/WeChat: The e-CNY challenges the dominance of private mobile payment platforms like Alipay and WeChat Pay.
  • International use: Cross-border payments with the Digital Yuan will promote its adoption globally and ultimately challenge the US dollar’s status.

Implications and Concerns

The e-CNY gives China’s government an unprecedented level of oversight and control over money. Key implications include:

  • Surveillance – The system enables complete monitoring over all transactions and money flows. User identities and data are tied directly to the digital wallet.
  • Programmable money – Smart contracts allow implementing conditional restrictions over payments. The central bank can control how, when, and where money is spent.
  • Financial sovereignty – Bypasses dollar dominance in international payments and trade. But increases reliance on the Chinese state.
  • User adoption – Depends on incentives and promotion to overcome inertia of existing payment platforms.

Frequently Asked Questions

What is the e-CNY wallet app?

The e-CNY app is a digital wallet to store, send, and receive the Digital Yuan. It is provided by the People’s Bank of China and requires identity verification. It allows making QR payments in stores.


Is the Digital Yuan live yet?

The e-CNY is still in pilot testing in several Chinese cities like Shenzhen, Shanghai, and Beijing. It has not yet been officially launched nationwide.

Can the e-CNY be used outside China?

Not yet, but cross-border payments are part of the PBoC’s roadmap. This will require cooperation with other central banks. Interoperability standards will be needed.


What happens to WeChat/Alipay?

The hugely popular payment apps face reduced dominance and oversight by the PBoC. The e-CNY may be integrated into their apps.

How does it impact the US dollar?

The e-CNY threatens the dollar’s status in global trade and finance. But full reserve currency transition depends on extensive international uptake.


To summarize, the Digital Yuan provides Beijing with unprecedented monetary control and financial surveillance capabilities. It seeks to upend existing power dynamics in mobile payments and international finance. Its impacts on privacy, economic sovereignty, and the monetary system could be profound.

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