China’s $1.5 million digital currency giveaway impressed analysts. Shoppers, not so much

In this news, we discuss the China’s $1.5 million digital currency giveaway impressed analysts. Shoppers, not so much.

SHENZHEN / HONG KONG / SHANGHAI (Reuters) – China’s experimental digital yuan $ 1.5 million (£ 1.16 million) gift to citizens of Shenzhen ended Sunday with praise from monetary analysts – and skepticism of some users who said they preferred existing shopping tools like the ubiquitous Alipay. app.

As part of the week-long program, the People’s Bank of China (PBOC) donated 200 yuan ($ 29.75) to each of the 50,000 consumers selected in a lottery in digital “red envelopes”, echoing the the country’s traditional way of giving money in cash.

The online wallet was accessible through an app, without the need for an existing bank account, with payments accepted via smartphone scans at downtown stores in China’s fourth largest city, from product retailers from luxury snacks.

The largest such lawsuit to date in the world’s second-largest economy has been hailed by analysts as a step forward for Beijing as it pursues what has become a holy grail among the world’s central banks – the world’s leading currency digital central bank.

“Last week’s event really means that the (digital yuan) has already moved from internal theoretical testing to real-world practice,” said Wang Shibin, co-founder of cryptocurrency trading platform HKbitEX.

But it has sparked fears among some overseas observers that if the digital yuan, which operates outside existing financial infrastructures such as Swift, gains international traction, it could undermine the US dollar’s dominance over global payments systems.

The PBOC did not immediately respond to Reuters’ request for comment on the conduct of the Shenzhen pilot program.

Earlier this month, seven central banks, including the United States, Britain and Japan, set out key principles for issuing digital currencies.

Raymond Yeung, chief economist of China at ANZ, said the digital yuan would have a greater effect at the national level because by allowing authorities to monitor the circulation of currency more closely, it would help prevent money laundering. silver. It could also allow a more targeted monetary policy or, in extremis, the perception of negative interest rates on liquidity.

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He said ordinary people would buy with the digital yuan rather than with mobile phone-based payment platforms like WeChat or Alipay “it all comes down to incentives, and which ‘provider’ motivates you the most. ‘use”.

Alipay, operated by a subsidiary of e-commerce giant Alibaba Group Holding Ltd, and Tencent Holdings Ltd’s WeChat Pay app dominate the business and have made China one of the most advanced payments markets in the world.

‘DELAYED DEPARTURE’

In the Luohu district of Shenzhen, more than 3,000 stores, from Dolce & Gabbana to supermarkets, accepted the digital yuan last week to pay for goods in part or in full using special devices to scan built-in QR codes. in a mobile application. It was not immediately clear how much of the total of the gifts had been spent, or where.

Skeptical reactions from some Shenzhen gift recipients – long accustomed to scanning phones to pay for goods with other systems – showed that the central bank and the government had work to do to convince consumers of the benefits of a digital yuan backed by the central bank.

“Alipay and WeChat Pay have been out for a long time,” said a customer who gave only her last name, Zhong. “The new digital currency is similar to these, so it is quite late to start the trial,” said Zhong, who said she was an accountant.

Zhong said she might consider switching to the new currency in the future, depending on its convenience and security.

Attracting users will largely depend on incentives to attract customers to Alipay or WeChat Pay, already used to buy everything from commodities to complex financial products, analysts say.

“It is especially important to offer practical and other benefits to promote the use of the digital yuan,” said G. Bin Zhao, senior economist at PwC China.

Beijing can combine it with grants, retirement accounts or public sector paychecks, he says, but “for the digital yuan to be accepted by the population, banks and other institutions need to invest heavily in applications, marketing and education.

Another downtown Shenzhen online wallet user, who gave him the surname Yuan, echoed the notion, saying spending his gift on digital currency was less convenient than the options available.

“I don’t plan to use it again,” said Yuan, who said she worked in finance. “Unless there’s another red envelope, of course.”

($ 1 = 6.7220 Chinese yuan)

Reporting by David Kirton in Shenzhen, Alun John in Hong Kong, Samuel Shen in Shanghai; Additional reporting by Cheng Leng in Beijing; Edited by Sumeet Chatterjee and Kenneth Maxwell

Original © Thomson Reuters

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