China’s central bank is blazing forward with its plans to release the digital Renminbi, the digitized version of its national currency. Chinese officials hope to make it available for public use in several major cities in time for the 2022 Olympics in Beijing. The digital Renminbi is due to function in a similar fashion to cryptocurrencies, with the main difference being its centralized nature. The People’s Bank of China will have full control of the currency and surveillance capabilities for all transactions. This development carries both advantages and risks for any parties involved in business with or within China.
Among the advantages are reduced costs for payments processing, faster transactions, and a streamlined process for international settlements. The hope is that the introduction of the digital currency will centralize all payments operations, reducing reliance on a complex network of traditional payment rails. The data from digital Remnibi transactions will supply the Chinese government with an enhanced toolkit for informed economic planning and policymaking.
At the same, time critics are concerned about what a digital Renminbi will mean for privacy and the Chinese government’s ability to surveil anyone who transacts within the country. It will also necessitate companies that do business in China to upgrade their payments processing technology, which may prove to be costly. Those that are slow to adapt risk losing their market share within China, a $5.3 trillion consumer goods market as of 2019.
More in-depth analysis on this can be found in the National Law Review.
Overview by Sam Klebanov, Research Analyst at Mercator Advisory Group