Yao Qian, recognized as the main driver of the digital yuan, was recently accused of using his regulatory influence to benefit technology companies in exchange for bribes. As a result, Qian, who was also the head of the technological supervision area of the China Securities Regulatory Commission, was expelled from the Communist Party and public service. The information was reported by Epoch Times, a Chinese newspaper based in the United States.
While this does not imply that the digital yuan project has taken an irreversible hit, there are no guarantees that the program itself will not be surrounded by people linked to corrupt practiceswhich is evidence that the initiative has failed, given that it was promoted as an anti-corruption solution, according to what was reported by the aforementioned media.
The design of a CBDC (Central Bank Digital Currency) has generated controversy for years, especially when trying to balance user privacy with regulatory demands.
China’s case is noteworthy as it began exploring the digital yuan in 2014, long before other countries considered embarking on similar projects. At that time, the People’s Bank of China formed a task force led by Yao Qian. By 2019, the initial design and development phases of the system were completed, and it was reported that The project was almost ready for testing.
In 2022, the use of «digital red envelopes» in several cities in China as a strategy to encourage the adoption of the CBDC. These electronic envelopes contain an amount of digital yuan and are a modern version of the traditional custom of giving money in red envelopes.
Despite these efforts, the Chinese CBDC has found important obstacles. In May this year, the South China Morning Post reported about a test in which several state employees received their salaries in digital yuan, but most decided to transfer those funds to their traditional bank accounts to convert them into cash. This resistance raises questions about the long-term viability of the project.
So, Epoch Times rated the digital yuan initiative, as “another unfinished project of Xi Jinping” and highlighted as significant that, in 2023, The Paper, a digital media run by the state group Shanghai United Media Group (SUMG), published an article titled “The yuan digital has been promoted for four years. Why do so few people use it?
The newspaper also reported that it contacted Tang Jingyuan, a prominent commentator in the United States, who said that the scandal surrounding Yao Qian reveals that The digital yuan project is clearly not moving on the right track. According to Tang, the situation has led Chinese leaders to take a step back to reevaluate the program and thus avoid possible social tensions. The commentator emphasizes that China decided to focus on promoting the growth of private companies instead of rushing with the implementation of the CBDC.
The truth is that setbacks and changes in focus are beginning to be common in the development of CBDCs. A Citigroup report, cited in a article of CriptoNoticias in September, reflected that, currently, only 15% of financial institutions consider the use of CBDCs viable, compared to 52% who thought so in 2022. This decrease in valuation responds, in large part, to the inherent difficulties to the development of these projects, as well as concerns about their impact on the financial balance.
Several countries have launched, or are experimenting with, their own central bank digital currencies (CBDCs), but so far none have achieved successful implementation. To cite a few examples, Jamaica presented its JAM-DEX in 2022, with the expectation that 70% of the population will use it by 2027, but adoption remains low. Russia, with its “digital ruble,” began testing in mid-2023 and anticipates greater adoption by 2025, but its first results were somewhat problematic. In India, although they launched two versions of their CBDC in 2022, are still resolving technological and privacy challenges.
Common reasons behind the lack of success include infrastructure issues, limited adoption, and privacy and security challenges, suggesting there is still a lot to do before these digital currencies become mainstream. However, some media hold that the expansion of BRICS, whose last summit was held in the city of Kazan, Russia, could open new doors for CBDCs.
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