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China has told fast-food chain McDonald's to expand a trial of its digital yuan payments system before the Beijing Winter Olympics kicks off, according to sources quoted by the Financial Times.
The country's central bank digital currency (CBDC), known variously as the digital yuan, e-CNY, e-RMB, e-renminbi, and DCEP (Digital Currency, Electronic Payment), is currently being trialed ahead of a full-scale launch planned to take place around the Beijing Winter Olympics in February 2022.
As part of a pilot scheme, digital yuan wallets are currently being tested as a means of payment at 270 McDonald's stores in Shanghai.
Now, according to the FT's sources, the Chinese government is urging the company to roll the payments system out more widely and is pressuring other retailers including Nike and Visa to follow suit. Both Nike and Visa declined to comment, while a McDonald's spokesperson stated that, "Shanghai is our pilot city and we will learn from customers’ response."
According to a source "close to China's financial regulators," the state-owned Bank of China (one of the sponsors of the Olympic Games) is behind efforts to get merchants in the Shanghai area to sign up to the digital yuan program but noted that they're free to refuse.
What is the digital yuan?
First proposed in 2017, the digital yuan has been in trials since 2020, with the People's Bank of China (PBoC) airdropping millions of digital yuan to citizens. By July 2021, over 20 million digital yuan wallets had been set up, with the country preparing for a full launch of the CBDC around the 2022 Winter Olympics in Beijing.
It's currently one of the furthest advanced central bank digital currency projects in the world. CBDCs are similar to stablecoins, being pegged to a fiat currency, but with the crucial distinction that they're backed by states.
They also differ from cryptocurrencies in that they aren't typically based on a decentralized blockchain, with the ledgers that record transactions instead being controlled by the central bank in question. Indeed, it's been argued by some analysts that China's summer 2021 crackdown on Bitcoin was at least partly motivated by the desire to keep a decentralized rival to the digital yuan in check.
Abroad, the reaction to China's digital currency efforts has been mixed. In the U.S., a trio of Senators have urged the U.S. Olympic and Paralympic Committee to "forbid American athletes from receiving or using digital yuan during the Beijing Olympics," citing its potential to be used to surveil Chinese citizens and visitors to the country.
Meanwhile, proponents of a "digital dollar" have urged the U.S. to press ahead with its own CBDC to maintain the "important role of the U.S. dollar in the global economy."