The popularization of digital RMB still needs to break through

The pilot work of digital RMB is being deeply promoted, but the acceptance environment of digital RMB hard wallets still needs to be improved, and the application of digital RMB has fallen into the embarrassing situation of "no activity, no one using".

As the 2025 Spring Festival approaches, crowds gather on Shanghai's Nanjing Road pedestrian street, where they can buy fashionable items, taste traditional Shanghai cuisine, or purchase medicine, all with a single mobile phone and a QR code for digital RMB payment, even in areas without electricity or internet. Central bank digital currency (CB-DC) is gradually entering the homes of ordinary people along with the pace of the digital economy.

The People's Bank of China started researching digital RMB in 2014, conducted the first batch of trials in 2019, the second batch in 2020, published a white paper in 2021, released the digital RMB APP in 2022, and arranged for more cities to join the trial. Currently, Shanghai, Xiamen, Guangzhou, and other places are actively promoting the trial of digital RMB. The application scenarios of digital RMB have also expanded from personal consumption scenarios (C-end) to services for public enterprises such as salary distribution, inclusive loans, green finance (B-end), and continuously extended to government service scenarios such as finance, taxation, public utilities (G-end).

However, a recent on-site investigation by reporters found that the acceptance environment for digital RMB hardware wallets still needs to be improved, and the application of digital RMB has fallen into the embarrassing situation of "no activity, no one uses". Deepening cross-border application and infrastructure construction, promoting the construction of the basic capabilities of digital RMB, expanding the digital RMB application scenarios from retail to wholesale, and expanding from payment to include a broad range of financial services such as deposits, loans, remittances, and investments, may resolve the current embarrassing situation of the pilot application of digital RMB, which is also the current direction for promoting the pilot application of digital RMB.

Deepening the pilot of digital RMB

In recent years, many provinces and cities have refined and deepened the pilot work of digital RMB. In April 2024, the Department of Industry and Information Technology of Hebei Province and the People's Bank of China Hebei Branch jointly issued the "Implementation Plan for the Pilot Work of Digital RMB in the Field of Industry and Information Technology in Hebei Province", proposing to guide the application of digital RMB in the industrial chain. By 2025, we will create 100 pilot demonstration projects for digital RMB, form a batch of pilot experience and solutions that can be replicated and promoted, and achieve full coverage of large-scale industrial enterprises, high-tech zones, and 107 key industrial clusters.

In the second half of 2024, the Fuzhou Housing and Urban-Rural Development Bureau and the Office of the Financial Committee of the Fuzhou Municipal Committee of the Communist Party of China issued a notice on the pilot work of digital RMB in engineering payment applications, clarifying that in order to give full play to the high efficiency and low cost advantages of digital RMB, further deepen the incremental expansion of digital RMB in the application of engineering payment, and carry out pilot work on digital RMB engineering payment applications in the city, in accordance with the Fuzhou Municipal Government's "Notice on Printing and Distributing the Action Plan for the Three-Year Pilot of Digital RMB in Fuzhou (2024-2026)".

At the end of November 2024, the Shanghai Municipal Government Executive Meeting reviewed and approved a new round of digital RMB pilot application action plan. The action plan clearly states that it is necessary to further promote the application and service innovation of digital RMB in a stable manner, and strive to basically form a digital RMB ecosystem with wide coverage of scenarios, good payment service experience, rich innovative applications, and active participation of all parties by the end of 2025.

At the beginning of 2025, the Guangzhou Municipal Party Committee's Financial Office issued the "Action Plan for Further Promoting the Digital RMB Work in Guangzhou", which clarifies the main tasks of the pilot work from seven aspects, and gradually promotes the pilot work in three stages: incremental expansion stage (June 2025), innovative scenario stage (end of 2025), and exploration breakthrough stage (end of 2026). In the incremental expansion stage, efforts will be made to achieve significant coverage in the fields of people's livelihood, sports, consumption, culture and tourism, public transportation, and prepaid services, promoting the incremental expansion and quality improvement of the digital RMB, and keeping indicators such as wallet volume and transaction scale at the forefront of the province, consolidating the achievements of the previous digital RMB pilot. In the innovative scenario stage, focus on breakthroughs in key areas such as cross-border payment, Hong Kong and Macao trade, demonstration zone construction, and prepaid supervision. In the exploration breakthrough stage, efforts will be made to achieve full coverage of digital RMB application scenarios in specific regions by the end of 2026, and form a relatively complete digital RMB ecological system.

Broadway Consulting's chief analyst Wang Pengbo pointed out to the International Financial News reporter that in recent years, the primary goal of the digital RMB pilot is mostly at the testing level, to verify the stability, usability, convenience, applicability, and controllability of the digital RMB system, laying the foundation for the comprehensive promotion of the digital RMB. In addition, it is also a clear goal to expand the application coverage of digital RMB in different regions, scenarios, and populations, and gradually establish a sound digital RMB ecosystem. At present, innovation is mainly focused on the combination of digital RMB and smart contract technology, enabling automatic payment transactions based on conditions and rules agreed upon by the parties involved in the transaction.

Hardware wallet acceptance environment needs to be improved

The digital RMB (e-CNY) is the digital form of legal tender issued by the People's Bank of China, operated by designated operating institutions, based on the broad account system, supports loosely coupled bank account functions (digital RMB wallet can be opened without a bank account), and is exchangeable with physical RMB at a 1:1 ratio, jointly constituting the legal tender system, with value characteristics and legal tender, supporting controllable anonymity, also supporting offline or non-electric payments, and can carry smart contracts.

Personal digital RMB wallets are classified into first class, second class, third class, and fourth class (non-real-name) wallets based on the strength of identity recognition. Since the pilot started in 2019 until the end of July 2024, the digital RMB app has opened a total of 180 million personal wallets, and the cumulative transaction amount in pilot areas has reached 73 trillion yuan. Recently, reporters conducted on-site visits and interviews in Shanghai and learned that digital RMB has been embedded in various aspects of people's daily lives, and most places can accept digital RMB QR code payments. At the intelligent terminals in bank branches, identity recognition can upgrade the wallet to a first-class one.

In the deep winter streets of Shanghai, with the cold wind blowing, the bustling Nanjing Road pedestrian street gathers faces from around the world, and the lively atmosphere remains. During the visit, the journalist found that as a landmark business district in Shanghai, Nanjing Road pedestrian street not only supports the use of overseas cards for consumption, but also supports mobile payment and scanning payment with digital RMB. However, digital RMB hard wallets are almost not accepted. The staff of the First Department Store, First Food, First Medicine, and Baodashang Youth Children's Shopping Center on Nanjing Road all told the journalist, "Digital RMB hard wallets are not supported," "The acceptance equipment needs to be upgraded, and it definitely does not support if it has not been upgraded."

In addition, the digital RMB has not yet formed a spontaneous and active momentum for use by users, falling into the embarrassing situation of 'no activity, no one uses it'. According to the information gathered by reporters, employees of some branches of the six major banks in Shanghai have limited knowledge of the digital RMB, and the training of employees in operating institutions still needs to be strengthened. A staff member of a certain branch of Industrial and Commercial Bank of China in Shanghai is not clear about the function of the digital RMB app 'pull down to display the code for receiving money, pull up to display the code for making payment'. A teller at a certain branch of China Postal Savings Bank in Shanghai does not know how to upgrade to a first-class wallet. A staff member at a certain branch of Agricultural Bank of China in Shanghai is not clear about the difference between a first-class wallet and a second-class wallet. A staff member at a certain branch of Bank of Communications in Shanghai is not clear that a first-class wallet has no limit.

A staff member from a branch of China Construction Bank in Shanghai told reporters in a previous interview that "a monthly salary of 500 yuan is issued in digital RMB, most of which is transferred to bank cards as soon as it is received. It is not very convenient to use digital RMB, and there is no interest in the digital RMB wallet. Now (the promotion of using digital RMB) is not as strong as before."

Infrastructure construction needs to be improved

Mu Changchun, director of the Digital Currency Research Institute of the People's Bank of China, once revealed in an article that the next step in the pilot application of digital RMB is mainly to deepen cross-border application and infrastructure construction, promote the construction of the basic capabilities of digital RMB, establish a sound system for the supervision, operation, and self-discipline of digital RMB, further improve the top-level design, promote the construction of institutional rules and regulations, expand the application scenarios of digital RMB from retail to wholesale, and expand payment to include a broad range of financial services such as deposits, loans, remittances, and investments, effectively enhancing the function of legal currency, and improving the efficiency, management, and service capabilities of financial resource allocation.

Xu Li, associate professor at Antai School of Economics and Management, Shanghai Jiao Tong University, pointed out to reporters that there are three main factors hindering the popularization of digital RMB applications: First, the existing payment tools have extremely high viscosity, and consumers find it difficult to switch to other payment methods; Second, users' understanding and acceptance of digital RMB is insufficient and still remains equivalent to traditional electronic payment tools; Third, the incentive mechanism for participants of digital RMB is insufficient, especially the lack of effective incentive mechanism for commercial banks. The promotion of digital RMB requires operators to invest a lot of manpower, material resources and financial resources, but it may not bring significant returns in the short term. Therefore, the lack of motivation of operators in the promotion process has affected the expansion of digital RMB scenarios.

Wang Pengbo suggests that, under the premise of adapting to the development needs of the times and improving the risk control mechanism, we should continuously break through and reform the positioning of digital RMB; explore from the perspectives of policy and technology how to better utilize and mobilize the enthusiasm of banks, consumer finance, and internet platforms. For example, establishing a fee mechanism, providing certain fee subsidies or preferential policies to financial institutions that actively promote digital RMB business; or encouraging financial institutions to carry out innovative businesses based on digital RMB, and providing certain policy support and rewards.

Xu Li believes that, in terms of top-level design, it is necessary to further improve the legal and regulatory system, establish a regulatory framework for digital RMB, and ensure the security, stability, and sustainable development of digital RMB. Secondly, strengthen the coordination and cooperation among regulatory authorities to form an effective regulatory force. By issuing relevant policies, encourage and support financial institutions, technology companies, etc. to participate in the research and application of digital RMB, and promote the application of digital RMB in wholesale, deposit and loan, exchange, investment, and other broad financial business areas.

In terms of infrastructure construction, the first thing is to improve the functionality of the digital RMB payment system, enhance payment efficiency and stability; secondly, continuously promote the interconnection between the digital RMB payment system and existing payment systems. Following the principle of 'not changing user payment habits, not increasing merchant costs', promote the interconnection of digital RMB with traditional electronic payment tools and barcode payment tools to enhance ease of use and achieve diversified payment methods.

In terms of incentive mechanisms, firstly, enhance market acceptance, and prioritize the use of digital RMB in areas such as government expenditures and public services, driving the use of digital RMB through the government's demonstration effect, especially by enterprises. Secondly, strengthen the popularization and promotion of knowledge about digital RMB, enhance the public's understanding of digital RMB, and trust this digital form of legal tender.

Third, establish an effective user incentive mechanism, design and evaluate the effectiveness system, and enhance the enthusiasm of users to use digital RMB. In various policies that drive the economy through consumption, the promotion of digital RMB can not only accurately evaluate policy effectiveness but also expand the application scenarios of digital RMB.

Fourth, establish an effective incentive mechanism for digital RMB service agencies to participate, increase the participation of service agencies by expanding the application scenarios of digital RMB, especially through cooperation with financial institutions and payment institutions to develop value-added services, such as digital RMB wealth management, insurance, loans, etc., to provide more possibilities for the profitability of service agencies.

(Source: International Financial News)

Source: Oriental Fortune Network

Author: International Financial Daily