China's official digital yuan app, e-CNY, had 261 million unique users at the end of 2021, nearly twice what it had in October, even before it was released in app stores this month, according to a central bank official.

The digital yuan, officially known as the Digital Currency Electronic Payment, was also being accepted by more than 8 million merchants by the end of December, and had been used in transactions totalling 87.6 billion yuan (US$13.8 billion), Zou Lan, head of financial markets at the People's Bank of China (PBOC), said at a press conference on Tuesday.

The rapid growth of e-CNY is part of the central bank's aggressive push to boost adoption of the country's central bank digital currency (CBDC), which is being trialled in at least 11 cities. In October, the app had just 140 million individual digital yuan accounts and 10 million corporate accounts, Mu Changchun, head of the PBOC's Digital Currency Research Institute, the unit in charge of the digital yuan, said in November.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

China's digital yuan app is topping download charts ahead of Lunar New Year

The proliferation of the sovereign digital currency in China, which strictly bans the use of cryptocurrencies such as bitcoin, comes ahead of the 2022 Beijing Winter Olympics and the Lunar New Year holiday, which both start the first week of February. It also comes as Ant Group's Alipay and Tencent Holdings' WeChat Pay, the country's two dominant mobile payment services, face increased regulatory oversight. Ant is the fintech affiliate of Alibaba Group Holding, the owner of South China Morning Post.

Both these apps also offer payments in digital yuan, but users must first have the e-CNY app to transfer the currency into their digital wallets for Ant's MyBank or Tencent's WeBank.

Many governments around the world are exploring their own CBDCs, but China is the first to roll one out on such a large scale. It could prove to be a trailblazing decision. Agustin Carstens, general manager at the Bank for International Settlements, said in a speech this week that central banks, not technology companies, are the best institutions to provide trust in money in the digital age.

The State Council, China's cabinet, said in a policy blueprint earlier this month that it would encourage the use of digital yuan. At the Tuesday press conference, Zou said the PBOC would promote its use in retail transactions, utility payments, and administrative services.

Since launching in Apple's App Store and multiple Chinese app stores for Android on January 4, e-CNY has become one of the most downloaded apps in the country. It topped Apple's and Xiaomi's app stores within the first week.

Signage for the digital yuan at a self check-out counter inside a supermarket in Shenzhen on November 20, 2020. Photo: Bloomberg alt=Signage for the digital yuan at a self check-out counter inside a supermarket in Shenzhen on November 20, 2020. Photo: Bloomberg>

For now, though, use of the digital currency is limited to designated cities, including Shenzhen, Suzhou, Xiongan, Chengdu, Shanghai, Hainan, Changsha, Xian, Qingdao, Dalian, and Beijing, which includes Winter Olympics venues.

The 2022 Winter Olympics is scheduled to begin February 4 in China's capital, where foreign visitors will also be able to use e-CNY without a domestic bank account, the central bank said last year.

An increasing number of places in the city now support e-CNY payments, including buses, subway stations, the Wumart supermarket chain, and certain merchants at tourist spots such as the Forbidden City, Old Summer Palace, and Badaling, the most-visited portion of the Great Wall.

At the same time, use of e-CNY lags far behind Alipay and WeChat Pay, which together control over 90 per cent of the mobile payments market.

NFTs are hot commodities in China despite ban on profit

Two cashiers at a Wumart store in eastern Beijing told the Post on Wednesday that "not many" customers have chosen to pay with digital yuan. Those who use e-CNY often do so because they have vouchers, given as subsidies by banks and merchants to encourage use of digital yuan.

In the push to promote e-CNY, multiple participating cities have given away the electronic cash through lotteries.

In October 2020, Shenzhen issued 50,000 digital red packets with 200 yuan each. Two months later, Suzhou offered a total of 20 million digital yuan to 100,000 residents.

However, China has yet to announce a formal timetable for the nationwide launch of its digital fiat money.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.