The Chinese government’s project of central bank digital currency (CBDC), the “digital yuan,” has been met with low demand and disinterest from Hong Kong citizens.
Low demand for digital yuan hard wallets
Despite the installation of machines dispensing hard wallets for digital yuan in Shenzhen, which were programmed to serve the citizens of Hong Kong exclusively, only 625 wallets were obtained in the first four days since their installation.
The initiative, launched by the Bank of China and smart card provider Octopus Card, aimed to issue 50,000 hard wallets by March 31. The 20% discount on purchases from 1,400 local vendors subsidized for CBDC owners by the government did not become a deciding factor for the potential holders.
The digital yuan, also known as the e-CNY, was launched under the guidance of the Currency, Gold and Silver Bureau of the head office and the Digital Currency Research Institute.
The Shenzhen Central Sub-branch of the People’s Bank of China thoroughly studied and implemented the report of the 20th National Congress of the Communist Party of China, which aimed to promote the construction of the Guangdong-Hong Kong-Macao Greater Bay Area and support Hong Kong and Macao to better integrate into national development.
The digital renminbi hard wallet self-service card issuing machine was officially launched on February 22, 2023, providing safe, efficient, and convenient digital renminbi payment services for people coming to Shenzhen and Hong Kong.
People who come to Shenzhen and Hong Kong can use the Octopus APP to apply for the “Guangdong-Hong Kong-Macao Greater Bay Area-themed digital RMB hard wallet.”
While the initiative aimed to promote cross-border applications and build a financial service system with better quality, more variety, and more convenient services for people’s livelihood in the Guangdong-Hong Kong-Macao Greater Bay Area, Hong Kong citizens seem to be rejecting the digital yuan.
A look at some potential reasons
Possible reasons for the low demand could be the lack of trust in the Chinese government and its financial systems, concerns about data privacy and security, and the preference for other payment methods such as credit cards and mobile payment platforms like Alipay and WeChat Pay.
Another factor could be the political tensions between China and Hong Kong, which have been rising since 2019 after the controversial extradition bill sparked mass protests in the city.
The protests later evolved into a broader pro-democracy movement, and China’s national security law passed in June 2020 has been criticized for undermining Hong Kong’s autonomy and freedoms.
The low demand for the digital yuan in Hong Kong could be a blow to China’s efforts to promote its CBDC domestically and internationally.
The digital yuan has been in development since 2014 and is seen as a potential rival to other digital currencies like Bitcoin and Facebook’s Diem.
However, it remains to be seen whether the digital yuan will gain wider acceptance in China and beyond. While the digital yuan could offer benefits such as faster and cheaper transactions and greater financial inclusion, it also raises concerns about centralization, surveillance, and control.
