To crowd out the cryptos, hand out the central bank digital currency (CBDC). To that end, China is ramping up pilots of its soon-to-be-widely deployed digital yuan to include lotteries. It’s a novel approach to getting digital yuan into the hands of a widening audience, almost surely at cryptos’ expense.
As reported, per an announcement by the Beijing Local Financial Supervision and Administration Bureau, China’s lottery is worth about $6.2 million. In terms of mechanics, residents in Beijing can apply early next week to join the lottery. The lottery will feature 200,000 prizes that are worth about 200 digital yuan, which can then be used to transact with several retailers.
The lottery comes after other trials in the country, where, for instance, Chengdu residents, back in February, were given roughly $6 million in digital yuan to spend. The central bank also piloted CBDCs across several cities, including Shenzhen, Suzhou and Hangzhou.
China has plunged into the global race to launch CBDCs, conducting tests in such major cities as Shenzhen, Suzhou and Hangzhou. The move comes as payment services have replaced cash in many of China’s consumer transactions.
Focusing on Retail
The lotteries are the latest sign that China is increasing its focus on retail transactions as a way to drive familiarity with, and enthusiasm for, CBDCs. If consumers embrace the digital yuan, it’s not a far “stretch” to think that they will get what they need from fiat, which simply exists in a different form factor.
It’s no secret that authorities in China are looking to push cryptos to the side – and perhaps marginalize them completely. The central bank has already said it is working with Ant and Tencent to help develop the CBDC – which gives the fiat, when fully launched, the potential to be widely distributed and used in mobile payments.
Late last month, banking regulators in China seemed to effectively hobble cryptos’ standing, and potential, in the country. A joint statement from the China Internet Finance Association, China Banking Association and China Payment and Clearing Association stated, in part, that: “Financial institutions, payment institutions and other member units must earnestly strengthen their social responsibilities. They must not use virtual currency to price products and services, underwrite insurance businesses related to virtual currencies or include virtual currencies in the scope of insurance liability, and must not directly or indirectly provide customers with other services.”
The list of forbidden services goes on, including the acceptance of virtual currency or use of virtual currency as a payment or settlement tool. That’s a critical note: It means that crypto is out as a medium of payment, but CBDCs are are not. Part of the reason that the central bank may want to have digital fiat in its toolbox is that the offering can be tracked in ways that crypto cannot.
Back in March, China proposed global rules for how CBDCs should operate, including interoperability between CBDC systems of different jurisdictions and exchange.
Bit by bit, then, bitcoin (and brethren) is out in China, and CBDCs are in.