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Digital Yuan: A 360 Degree Guide to China’s Digital Currency

Digital Yuan: A 360 Degree Guide to China’s Digital Currency

In 2020, China became the first major economy to roll out a digital currency for widespread use: The Digital Yuan. Though it is not the world’s first digital currency nor the first central bank-issued digital currency, the scale and speed of the adoption of the digital Yuan have been unprecedented.

Key points

  • Digital Yuan is a digital currency backed by the central bank of the People’s Republic of China. It is fixed to the value of the Yuan and is also known as the Digital Currency/Electronic Payment (DC/EP), E-CNY, Digital Renminbi, and Digital RMB.
  • Thirty million individuals and 5.6 million merchants use digital Yuan. There is currently $2 billion worth of digital Yuan in circulation. It is currently only used in the People’s Republic of China.
  • Chinese law enforcement agencies monitor digital Yuan transactions, but users may opt for anonymity from other private parties.
  • The Chinese government is planning to make digital Yuan available for cross-border transactions. This could significantly affect traditional bank transfer systems and US economic sanctions.

Digital Yuan has led to many questions and speculations; is it a blockchain-enabled cyrptocoin? Can it be used outside of China? Does this signal the beginning of the end for a dollar-based global economy? Will Digital Yuan mean a new era of government surveillance? Should International businesses be fearful or excited about the digital Yuan?

We’ll take an in-depth look at what the digital Yuan is and what it is not, look at the space it will inhabit in the Chinese domestic economy, and examine what role it could play in global business transactions. We’ll also cover the history of the digital Yuan, explain how it can be used, and discuss its potential benefits and downfalls. Regardless of one’s opinion of the Chinese government or the future of digital currency, the rollout of the digital Yuan signals a seismic change in how money is used in China and, possibly, the world.

What is digital Yuan?

The digital Yuan is a Central Bank Digital Currency, backed by the People’s Bank of China (PBOC). It is also known as the Digital Currency Electronic Payment (DC/EP), digital renminbi, digital RMB, and E-CNY. Like other digital currencies and cryptocurrencies, it enables instantaneous electronic transactions between users’ electronic wallets.

  • The digital Yuan is a ‘stablecoin,’ meaning its value is pegged to that of a traditional asset. One digital Yuan is worth exactly one physical Yuan, the base unit of the People’s Republic of China’s (PRC) official currency, the Renminbi (RNB). Because of this, the digital Yuan will not experience wild market-based fluctuations in value like Bitcoin and other cryptocurrencies, which are not backed by central banks or other assets. Digital Yuan does not exist on a blockchain, it is under the centralized control of the PBOC.
  • The Chinese RNB itself does not have a floating exchange rate; currently, the value of the Yuan, and thus the digital Yuan, is pegged to the value of the US dollar.
  • The digital Yuan is intended to replace physical cash. Using the definitions applied by central banks, it is classified as M0, the same as physical currency. It is not M1, deposits; M2, a marketable security; or M3, a money market fund. This is an important distinction because it shows that the digital Yuan is not a replacement for interest-accruing bank deposits or other, less-liquid forms of currency.
  • Digital Yuan will allow individuals to make instantaneous electronic transfers without going through a bank, and it will serve as an alternative to (and work with) electronic wallets provided by private banks and apps. It could allow individuals without bank accounts to make electronic transactions, enable electronic transactions at lower fees than those currently offered by apps and private banks, and allow the PRC to track money flows within the country more effectively. Non-PRC citizens are currently allowed limited use of digital Yuan, and if global use is expanded it could enable simpler international transactions with Chinese entities.

What was the timeline for the development of the digital Yuan?

1. From 2014 to 2016

The PBOC formed a research group on central bank-backed digital currency in 2014. By 2016, they had published of a number of research papers on the subject.

2. From 2017

In 2017 the Digital Currency Research Institute was established by the PBOC, which began hiring experts in cryptography. By the end of 2017, Chinese commercial banks and electronic payment providers were invited to join in the development of a central bank-backed digital currency.

3. From 2019 to 2020

Trial programs were announced in 2019 and in April 2020 the PBOC began testing the digital currency with the Agricultural Bank of China.

In November 2020, the digital Yuan pilot program began in Shenzen, Suzhou, Chengdu, and Xiang’an. These cities, located in the South, Southeast, Southwest, and North of China, respectively, enabled a wide-ranging test of the digital currency, in some of the most economically active parts of the country.  Shenzen, often thought of as the Silicon Valley of China, had a population of over 17 million at the time; Suzhou, population 6 million, is part of the Greater Shanghai metro area; Chengdu is a regional hub with a population of 20 million; while Xiong’an is a newly established area near Beijing, intended to house a number of governmental agencies. It is under the direct oversight of the Chinese Communist Party (CCP).

The enormous scale of this pilot program allowed the PBOC to test the digital currency in a number of conditions and economies, and it was the first use of a digital currency by a major world power.

During the initial trial period, the digital Yuan was tested in terms of stability, reliability, ease of use, and its ability to reduce money laundering, financing of terrorist organizations, and tax evasion.

4. From 2021

In 2021, the pilot program was expanded to Shanghai, Qingdao, Dalian, Xi’an, Changsha, and Hainan. By the end of that year, there were 261 million users of digital yuan and a total of $13.8 billion in transactions had been made.

5. From 2022

In 2022, testing was expanded into the provinces of Xiamen, Guangzhou, Tianjin, Chongqing, Fuzhou, Xiamen, Xushuangbanna, Nanning, Kunming, Fangchenggang, Jinan, and parts of Zhejiang. Digital yuan was used by international attendees at the 2022 Beijing Winter Olympics as well, though on a very limited scale.

At the time of writing, approximately 5.6 million merchants accept payment in digital Yuan, and over 30 million individuals have downloaded the digital Yuan wallet app. There is currently approximately $2 billion worth of digital Yuan in circulation.

The CCP expects fast and large-scale adoption of the digital Yuan throughout 2023. The local CCP of Suzhou, for instance, has set a target of $300 billion in digital Yuan transactions, including $30 billion in digital loan transactions for small and medium enterprises. Companies hiring employees in China should take note — digital Yuan is already being used to pay salaries for some public servants and is likely to spread into the private sector relatively soon. 

China Digital Yuan Timeline

Why was digital Yuan introduced?

Digital Yuan is primarily an alternative to physical cash. Though most Chinese now have bank accounts, as of 2017 there were still approximately 225 million adults in China who did not. This represents the largest unbanked population in one country. A major reason for the adoption of the digital Yuan is to provide these individuals with easy digital access to financial services. Currently, most users of digital Yuan top-up their wallets via a commercial bank account, however, the service could be decoupled from the banking system in the future.

Though at one time China was the global hub of Bitcoin and other cryptocurrency mining, a ban on all cryptocurrency transactions in September 2021 put an end to the practice. The digital Yuan can be seen as a state-backed and monitored alternative to cryptocurrencies, which are generally anonymous and not controlled by a central bank.

The quick development and adoption of the digital yuan is also part of a push by the CCP to make China the global leader in the development of digital technology, particularly fintech. As adoption increases, the ecosystem of other apps, services, and financial instruments that utilize digital Yuan will also grow rapidly, putting the PRC far ahead of other nations in their development and use of this technology. In February 2022, the Asian Development Bank published a Discussion Paper examining the digital Yuan, its relationship to existing forms of digital payments in China, and how it may affect the Chinese financial system in the future.

At the time of publication, the PBOC was exploring the use of digital yuan for cross-border payments, the majority of which currently utilize US dollars and the traditional banking system. This could give China greatly increased clout on the world stage, particularly with countries that face US economic sanctions (for further discussion on this motivation for digital yuan, check out Bansal & Singh’s comprehensive analysis in China’s Digital Yuan: An Alternative to the Dollar-Dominated Financial System).

As the controller of the world’s most common reserve currency, the US can exert considerable leverage over other countries by selectively limiting USD bank transactions; this was famously done when Russian banks were banned from SWIFT transactions following the Russian invasion of Ukraine, for instance. The digital yuan could serve as a framework for bypassing limitations and sanctions set by the US in the future. Though this is not a stated goal for the development of the digital Yuan, it is in line with other moves by the CCP (such as the creation of the China Development Bank) to circumvent the US-dominated Bretton Woods system of international banking.

How does digital Yuan work?

The supply of digital Yuan is controlled by the PBOC, China’s central bank. The PBOC releases digital Yuan to commercial banks, who may lend out a portion to customers and are required to hold another portion in reserve.

Because digital Yuan is an M0 currency, the PBOC holds direct liability, the same as cash. As an M0 form of currency, digital Yuan wallets are not considered bank accounts and cannot accrue interest. Only a bank may convert digital Yuan into a bank deposit, or convert a deposit to digital Yuan. Because the digital Yuan is a form of official currency, merchants cannot refuse to accept it as payment. This is not the case with other types of electronic wallets.

Digital Yuan wallet holders may transfer money peer-to-peer easily and instantly through the app. Merchants use a growing ecosystem of services and institutions to receive, process, and deposit digital Yuan payments.

Though Chinese law enforcement can track transactions in order to prevent fraud and money laundering, digital Yuan wallet holders may hide their identities from other parties when making transactions. This semi-anonymous feature will limit the amount of data that can be collected by third-party apps and platforms.

In practice, digital Yuan works similarly to the electronic payment systems that are already ubiquitous throughout China, such as AliPay and WeChatPay; a smartphone is used to scan a barcode provided by a merchant or another user to initiate a transaction.

CNBC on how digital Yuan functions

What are the expected benefits of the digital Yuan?

Digital yuan is predicted to have a range of benefits, both for those in China and others engaging with Chinese businesses. 

1. Efficiency for consumers 

Digital yuan provides a secure, central bank-backed structure to potentially all digital transactions. Currently, consumers use different apps, wallets, and accounts for different commercial transactions, bank transfers, and bill payments. Digital yuan could centralize all of these transactions by enabling the use of a single account which is in turn linked to third-party shopping and payment apps. Since transfer fees for digital Yuan are significantly lower than for other electronic payments and transfers, consumers will likely see their fees go down as well.

2. User privacy 

Since digital yuan transfers can be made anonymously to other private parties, apps that use the currency may be limited in the amount of user data they are allowed to collect.

3. Enhanced law enforcement

While private data collection is limited, transaction data is made available to law enforcement. As adoption spreads through the entire country, these data flows can be used to track the funding of terrorist groups, money laundering, tax fraud, and other illegal activities. 

4. More efficient economic planning

Though the reforms of the last 40 years have created space for private markets and businesses, the Chinese economy as a whole is still directed by the CCP. In such a system, reliable data is crucial. Digital Yuan will allow officials to track broad changes in consumer spending, speculative investment, rates of savings, transfers of funds by internal migrants, and many other data points. This can be used to provide the most effective incentives to boost investment in slow-growth areas, encourage consumer spending in targeted industries, and reduce potentially dangerous speculative bubbles. 

5. China’s international reputation

The digital yuan will be a powerful tool enabling the PRC to develop international trade networks that do not rely on the US-dominated international banking system.

Since China is the largest manufacturer of global consumer goods and one of the most popular locations for global expansion, many international companies trading with China may wish to maintain Yuan accounts and reserves for their digital Yuan transactions.

Digital yuan could become an attractive alternative for many other cross-border transfers, not just those with Chinese producers. The system is less costly and faster than using US dollars and commercial banks, and the value of the Yuan is pegged to the US dollar regardless, so it may be seen as a more efficient method of international trade with no currency risk.

Finally, the digital yuan will enable businesses in countries facing US economic sanctions to bypass the SWIFT system. This will be an economic and political advantage to China, though with negative effects on the political power of the US and its ability to pressure human rights abusers.

What are the most significant criticisms of the digital Yuan?

1. International human rights

The potential use of digital yuan by repressive regimes such as Burma, Iran, or North Korea for instance, will decrease the effect of US sanctions. Though this could lead to economic growth in those countries, it will also strengthen their political regimes and make them less likely to bow to international pressure to conform to human rights frameworks.

2. Greater dominance over developing countries

Though digital yuan could reduce the pressure that can be applied by the US-dominated global banking system, it could lead to a parallel system dominated by the CCP.

If the digital Yuan is used as the de facto currency of international trade, it could also grow popular for peer-to-peer and small business transactions in countries with high inflation and reliance on Chinese imports, such as Zimbabwe. The CCP could gain an enormously powerful lever to exert pressure on smaller nations simply by limiting or allowing access to digital Yuan services. Additionally, this could provide a wider avenue for Chinese corporations to further dominate the economies of smaller countries.

3. Threats to existing payment systems

 By facilitating peer-to-peer transactions, reducing transfer times and fees, and potentially getting rid of the need for a bank account, the digital Yuan could become a direct threat to international banks, the SWIFT transfer system, international credit and debit card networks such as Mastercard and Visa, as well as existing electronic transaction systems like ApplePay (including popular Chinese methods such as WeChatPay).

Domestically, the PRC can provide incentives for electronic payment platforms and local banks that will make up for losses in revenue stemming from the adoption of the digital Yuan. These competitors have been working with the PBOC for years as it developed the digital Yuan system, and are well-positioned to adapt their payment ecosystems to accommodate the new digital currency.

International banks and payment platforms, however, will find themselves in a more difficult position. The digital currency will most likely prevail in the massive Chinese consumer market and will pose a challenge internationally, especially in those countries already within the Chinese economic sphere of influence.

To read more about the potential consequences of the digital yuan, check out Slawotsky, Joel, US Financial Hegemony: The Digital Yuan and Risks of Dollar De-Weaponization.

What is the digital Yuan app?

The digital Yuan wallet became one of the most popular downloads in China within a week of its launch. In practice, it is similar to other electronic payment apps; merchants or users can display a barcode, which another user may scan, initiating a transaction. When the user approves, the transaction is completed instantly.

The digital Yuan app, known as E-CNY, can currently only be downloaded to phones registered in China and is not available directly in an app store. To download the app, users scan a barcode issued by the Bank of China, ICBC, Agricultural Bank of China, Bank of Communications, China Construction Bank, or the Postal Savings Bank.

Scanning the barcode leaves to a welcome page, where users must enter their name, passport or PRC citizen’s ID number, and other information. Once personal details are accepted, the user receives a gift card for the Apple or Google app store, which allows the app to be downloaded.

The app can then be connected to a Chinese bank account, or it can be topped up via an online banking app.

Once registered and topped up or connected to a bank account, the E-CNY digital Yuan app can be used anywhere with any participating merchants or for peer-to-peer transfers.

The future for digital Yuan

The fast rollout and adoption of the digital Yuan is a testament to the remarkable speed at which the Chinese government can develop and adopt new technologies. With its advantages of allowing greater government monitoring or money flows, encouraging national fintech development, and reducing the cost of printing money, the Chinese government is likely to encourage the digital Yuan to become the de facto format for domestic transactions.

  • Though widespread international use of the digital Yuan may be a few years away, it could become a powerful tool for Chinese foreign policy and trade promotion. The sheer size of China’s economy is a challenge to US economic and political hegemony, and as many have proposed, signals the beginning of a new multi-polar world order. Could this be the start of a new cold-war type of scenario, where the world is divided by two competing economic models, each with its own international banking and finance institutions? That remains to be seen. 
  • To be sure, though, the successes and challenges of the digital Yuan will be closely monitored by other central banks. This is most likely the first of many central bank-issued stablecoins, which will entail the creation of a new ecosystem of international transfer and currency exchange apps. The New York Federal Reserve has also announced plans to develop a digital currency, though at this time its intended use is limited to band-bank transactions. Digital Yuan may be less a signal of an impending China-dominated global financial order than a harbinger of things to come for all nations. For more information, check out how the European Banking Institute’s working paper on the issue.
  • Though the utility of cryptocurrency (I.e. non state-backed digital money made with blockchain technology) also remains to be seen, the coming digital Yuan doesn’t necessarily signal it’s imminent destruction. Popular coins like Bitcoin and Ethereal are currently used as universal holders of value, like gold, and less often as transactional currencies. While central bank-issued digital currency, like digital Yuan, will be more attractive for most transactions, blockchain-enabled coins may still have a place in the world of digital money as stores of value and for speculative trading.

Digital Yuan shows that electronic money is not the sole territory of cryptocoins; it may very well be the future of fiat money as well. Whether China’s early start is a sign that they will dominate the field of digital transactions, though, remains to be seen.


  1. Fullerton, Elijah and Morgan, Peter J., The People’s Republic of China’s Digital Yuan: Its Environment, Design, and Implications (2022). ADBI Working Paper 1306, 2022. 
  2. Bansal, R. & Singh, S., (2021). China’s Digital Yuan: An Alternative to the Dollar-Dominated Financial System, CEIP: Carnegie Endowment for International Peace.  Available at CEIP
  3. Slawotsky, Joel, US Financial Hegemony: The Digital Yuan and Risks of Dollar De-Weaponization (2021). Fordham International Law Journal, Vol. 44, No. 1, 2020, Available here
  4. Didenko, Anton N. and Zetzsche, Dirk Andreas and Arner, Douglas W. and Buckley, Ross P., After Libra, Digital Yuan and COVID-19: Central Bank Digital Currencies and the New World of Money and Payment Systems (2020). European Banking Institute Working Paper Series 65/2020. Available here


The Digital Yuan, or e-CNY, is a digital version of the traditional Chinese yuan and operates within a different infrastructure. Unlike the physical yuan, the Digital Yuan circulates in an electronic form and is designed to facilitate digital transactions with greater efficiency.

No, the Digital Yuan is not a cryptocurrency. While both are digital in nature, the Digital Yuan is a central bank digital currency (CBDC), meaning it is controlled and issued by the central bank of China. Cryptocurrencies like Bitcoin, on the other hand, are decentralized and not controlled by any single entity.

Theoretically, yes, as long as the party accepting it recognizes the digital currency. However, given the traceability and control exerted by the Chinese government over the Digital Yuan, its global acceptance might be limited.

Unlike cryptocurrencies like Bitcoin which provide pseudonymity, transactions made with the Digital Yuan are fully traceable. The PBoC has implemented "controllable anonymity," meaning that while transactions may appear anonymous to the parties involved, the government can access transaction data as part of its efforts to prevent illicit activities such as money laundering.

No, the Digital Yuan cannot be purchased on international cryptocurrency exchanges such as Binance. It is a central bank digital currency (CBDC) with specific usage within China's regulated financial system, rather than a decentralized cryptocurrency.

Investment prospects of the Digital Yuan are largely speculative since it functions as legal tender rather than an investment like cryptocurrencies. Its value is tied to the performance of the Chinese economy rather than market speculation.

Conversion of Digital Yuan to USD can be performed through designated financial institutions. The specific mechanisms are not yet broadly detailed but will adhere to the People's Bank of China's regulations.

Article By
Managing Editor
Milly is an international lawyer and tech entrepreneur who has advised companies on expanding globally for over 5 years. She is an advocate of remote hiring and regularly consults on future of work matters. Milly founded RemotePad to help employers learn more about building and growing international teams.