Why the Fed Needs to Take the Digital Yuan Seriously
The e-CNY will be more than just a paperless version of cash for China’s local economy. Its use in trade settlement poses a challenge to the dollar.
Dollar threat.
Photographer: Gilles Sabrie/BloombergIf the Federal Reserve still wants proof of China’s intention to challenge the dollar’s hegemony, it should look no further than a small experiment currently under way in Hong Kong.
Last week, Bank of China (Hong Kong), one of the city’s big deposit-taking institutions, had its offer of 500 trial accounts tied to the e-CNY, the electronic version of official Chinese money, snapped up in two days. The customers are each being gifted 100 yuan in digital form, which they can spend at mainland stores, the JD.com website or a supermarket chain in Hong Kong. The modest debut underscores Beijing’s resolve: Even before the digital yuan could become a payment instrument of choice at home, authorities are testing its capabilities in another market.