China is preparing to roll out the digital yuan (e-CNY) to visitors from overseas at the upcoming Beijing Winter Olympics, as confirmed by the People’s Bank of China (PBOC), in what will be the first key test of the token’s appeal among foreigners.
“It’s a key task and challenge to make sure foreign visitors will have a good experience” with the digital yuan, said a central bank statement.
“We will strive to do a good job to ensure services during the Games, and operations, customer service, emergency response and other teams are all in intensive drills and preparations.”
Trials have been taking place in several regions across China since 2020, while the PBOC has been working on a full or partial rollout of the digital yuan in time for the Winter Olympics. And it’s now about to become a reality. Visitors can download an app or obtain a physical card storing the currency, or indeed exchange foreign banknotes into so-called e-CNY at self-service machines.
China’s rollout of the e-CNY at such a significant global event underscores the proof of concept of digital currencies, with them increasingly being recognized not only by retail and institutional investors, but by governments, as the future of money.
Why is this seismic shift in attitudes toward digital currencies happening now?
First, inflation. Concerns over soaring inflation are growing as economies around the world deal with the fallout from the Covid-19 pandemic. Indeed, we’ve seen this in the US recently as the Federal Reserve increased forecasts of interest-rate rises to combat surging inflation when the minutes of the latest meeting were published.
Bitcoin – the world’s largest cryptocurrency – and other digital currencies are viewed as a shield against inflation, predominantly because of their limited supply that is not influenced by price.
Second is institutional support. Investment is increasing all the time from major institutional investors, bringing with them capital, expertise and reputational pull.
Third is regulation. Financial watchdogs around the world are looking into establishing a regulatory framework, as they’re taking cryptocurrencies more and more seriously as a financial asset and a medium of exchange.
Indeed, according to new findings published by the International Money Fund, “Crypto assets such as Bitcoin have matured from an obscure asset class with few users to an integral part of the digital asset revolution.”
The authors of the research also urged for a global regulatory framework “to guide national regulation and supervision and mitigate the financial stability risks stemming from the crypto ecosystem.”
Regulation, which I think is inevitable, will provide greater protection and, as such, boost retail and institutional investor confidence.
The fourth key factor is demographics. Millennials – who are set to be the beneficiaries of the largest ever generational transfer of wealth – have been raised on technology.
They are digital natives, and cryptocurrencies are, by their very nature, technology driven. Moreover, they are decentralized, therefore not controlled by any financial institution, which are largely seen as outdated and untrusted by millennials.
Finally, fifth, adoption is increasing. Shrewd investors understand and recognize their intrinsic value. In our increasingly tech-fueled, globalized system, it just makes sense to hold digital, borderless, decentralized currencies and/or other digital assets. Consequently, cryptocurrencies are regarded as the future.
With Asia being the global leader in building central-bank digital currencies, the eyes of the world will be focused on the PBOC at the Beijing Winter Olympics, as the first large, industrialized nation to launch a CBDC.
And I’m certain that many others will accelerate their progress and follow suit, underlining the intrinsic value of digital assets in the digital age we live in.
Nigel Green is founder and CEO of deVere. Follow him on Twitter @nigeljgreen