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New money

Simon Rabinovitch: Asia economics editor, The Economist, SHANGHAI

China launches the world’s first official e-currency

THERE IS A good chance that the digital yuan will enter circulation in 2021. It is a debut
that will initially make little difference, but could, over time, change the way central
banks conduct monetary policy.

The People’s Bank of China has filed more than 100 patent applications for a digital
currency and has overseen a range of trials, putting the e-yuan into use in a few cities
and on several apps. So far the experiments have gone smoothly, and soon people will
have the option of downloading a government-issued digital wallet. Unlike commercial
ones such as WeChat Pay and Alipay, the official version will be equivalent to an account
at the central bank with the same solidity as hard cash.

For the millions who already use a smartphone instead of a debit card, it will feel like
just another payment app. Yet some talk of digital currency as a revolutionary product
that could spell trouble for banks as people withdraw money from savings accounts and
put it directly into their ultra-safe official e-wallets. What is more, if digital currency
were ever to fully replace cash, central banks would, in theory, gain three new powers: