Feeling around for a fit

But why should people adopt the e-CNY? It seems the government is still trying to figure that out. The PBOC has been piloting the currency for almost three years, testing a wide variety of potential uses. 

Kumar and her colleagues have documented 30 different test applications, ranging from bank loans to cards that combine e-CNY wallets with other functions. Examples include an “elderly care card,” which integrates health-care information and location data with an emergency service system; a “smart student ID”; and a card that pays e-CNY rewards for using low-carbon transportation. There are also several pilots focused on online commerce in rural areas. And in April, Changshu, a city of 1.5 million people, said it would start paying public employees in e-CNY.

“All kinds of little nooks and crannies of the payment system are getting reached by e-CNY,” says Darrell Duffie, a professor of finance at Stanford’s graduate school of business. 

Still, hardly anyone is using it. Though the system has been tested in 25 cities, and 260 million unique wallets hold a total of 13.61 billion RMB ($1.9 billion), last year e-CNY accounted for only 0.13% of the supply of central bank reserves and cash in circulation. “That’s very small after two years of piloting,” says Duffie. He says the only reason it’s still called a pilot is that it hasn’t taken off.

Officials have said there is no set timetable for the formal launch of the e-CNY, and that the bank is focused on improving the user experience and testing the security and resilience of the network rather than increasing adoption. But some close observers think the government underestimated how hard it would be to create a retail payment network from scratch.

“A lot of the ambition for this project has proven more difficult to achieve than they thought, and the timeline has been longer than people anticipated,” says Martin Chorzempa, a senior fellow at the Peterson Institute for Economics, a think tank in DC. What’s been especially difficult, he says, has been signing up enough merchants and creating a rich enough “ecosystem” to make the e-CNY as useful as established payment methods. 

“The e-CNY has to be as useful as Alipay and WeChat Pay for it to actually have a user base, and right now there really is not a use case,” says Chorzempa, who has written a book about China’s payment system. “People just get a red envelope, they spend it, and they generally don’t open the e-CNY app again,” he says, referring to the electronic icon the government uses when it doles out digital money to pilot participants. Chorzempa speculates that the challenges the PBOC has had in getting traction for the e-CNY inside China may be contributing to its increased focus on international uses. 

And that has put the e-CNY on a collision course with the US dollar.