Was China’s government backed cryptocurrency a success or a failure?

man holding bitcoin

Less than six months ago, China’s government prohibited all crypto-related activities (from mining to trading), arguing that these assets are not only a threat to the planet, given not only the increase in energy waste, but also its impact on the growth of cybercrime around the world.

Soon after the government’s decision, China’s Central Bank decided to launch its own centralized cryptocurrency, designed to be the next step in the economy’s modernization: a digital Yuan that can take advantage of the crypto market.

Nevertheless, just a handful of weeks after its launch, the future of the digital currency seems uncertain.

Winter Olympics and the adoption of the e-CNY

China began the adoption of the so called e-CNY (electronic Yuan) at the start of the 2022 Winter Olympics, celebrated in Beijing, carrying an ad campaign that dates to almost a decade ago. The currency is being used as a payment method for most social activities, including tourism, entertainment and dining.

According to official data, the total spend (using the e-CNY) mounted up to $315.000 each day of the event, with more than 250 million people registering in the digital wallet required to use the currency.

Even though some specialists say that the strong competition in the digital payment market (with companies such as WeChat and Alipay growing by the day) is limiting the usage of the stated-baked currency, it could still achieve massive adoption in the next few years.

Controversy over security threats

As of right now, it’s hard to determine if the asset’s adoption has been positive, what is clear is that the launch was not exempt from controversy. The main concerns being related to security threats such as spionage, given it is a centralized coin created and controlled by the Chinese government.

To login to the digital wallet, user’s must register by using personal information such as full name and date of birth. Foreigners, on the other hand, can register via passport, which would mean the government would get access to additional information such as the country of origin, legal signature and even the user’s face.

In order to pay via e-CYN, users must download an app to their smartphones, giving special permissions to the developers in order to run properly.

Given China’s advances in digital payments, experts say that the e-CNY is not creating additional benefits for the Chinese (or foreign) consumers, meaning that the currency would have the same limitations as other crypto assets, with the added disadvantage of general mistrust amongst enthusiasts.

“Traditional” cryptocurrencies remain undefeated

“Traditional” cryptocurrencies, currently prohibited in China, seem to be much more innovative and attractive to use, given not only that they are backed by Blockchain technology, but also that they can be used as investment assets.

Whoever possesses these assets is able to use them as a payment method, but also to hold them in order to earn money as prices increase. It is also possible to make money through alternative financial products, as the ones offered by sites such as crypto-genisus.com/pt, that produce returns even when prices collapse.

This seems to be the reason why, even though the government-backed asset has been adopted by millions of people within China, the e-CNY could be destined to remain as nothing but a local alternative to cash, complimenting a digital payment ecosystem that is already dominated by other competitors.

A month after the Winter Olympics ended, we still don’t have conclusive data in order to study the impact of the experiment led by China’s government, making it impossible to determine if the asset’s adoption was high enough to warrant more attention, or if it’s even capable to compete against other payment alternatives such as cash, plastic money or different digital payment tools.