China’s digital renminbi will go for gold at Beijing Games


While the world’s attention is focused on athletes in Tokyo, Chinese authorities are working feverishly to finish off preparations for the Winter Olympics that will take place in Beijing in six months’ time.

That doesn’t just mean building new stadiums; developers at the central bank are also getting ready for what will be the first major international test of the country’s new digital currency.

Last year, China became the first country to issue a central bank digital currency (CBDC) with the start of public testing. The tens of thousands of athletes and fans descending on the Chinese capital in February will provide an opportunity to test the new currency with foreign participants.

Athletes may be given tech-enabled gloves, badges or uniforms that they can use to spend the digital renminbi, or e-CNY, as it is also called. Foreigners will be allowed to open digital wallets and pay with e-CNY, though how exactly they will load up their wallets with digital yuan remains to be seen.

“Building Beijing Winter Olympics’ payment ecosystem is an important political task,” People’s Bank of China deputy governor Fan Yifei said last month. “We must address the current development challenges so we have an orderly and steady rollout of the digital renminbi.”

Central banks around the world are experimenting with digital currencies in response to the rapid shift away from cash and the growth of private currencies and payment networks.

China has pushed the boundaries of mobile payments faster than any other country. In 2019 — the most recent year for which figures are available — 66 per cent of transactions in the country were done by mobile phone, according to a PBOC survey. Cash accounted for 23 per cent and bank cards only 7 per cent. 

But Chinese authorities see one major problem in those statistics: the strength of private companies. Ant Group’s Alipay and Tencent’s WeChat Pay together control about 90 per cent of the Chinese mobile payment market. Bankers and regulators in Beijing worry that they have handed control over a key pillar of the financial system to two private firms.

“If Alipay or WeChat’s technology or financial systems have problems, it could negatively impact the stability of China’s financial system,” warned Mu Changchun, director-general of the Digital Currency Institute at the PBOC, this spring. 

Mu leads the central bank’s digital currency project, which aims in part to break the Alipay and WeChat Pay duopoly. The central bank has developed a digital wallet app for users to store their e-CNY, and unlike Alipay or WeChat Pay, offers merchants the opportunity to accept fee-free payments.

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Local governments looking to spur spending as the economy recovers from the coronavirus pandemic have been quick to issue e-CNY stimulus bills — some e-CNY even has a built-in digital timer so users can’t sit on their funds. 

Beijing’s regulatory crackdown also means the country’s tech giants have little choice but to co-operate with the officials determined to disrupt them. Alipay is testing the e-CNY with some users, while sister company Alibaba accepts it for online grocery purchases and at its food delivery service Ele.me. Ride-hailing company Didi, food delivery giant Meituan and ecommerce group JD.com are also introducing the use of e-CNY.

Martin Chorzempa, research fellow at the Peterson Institute for International Economics, said China’s quick rollout of the e-CNY “is effectively about control”.

“[Beijing feels] this political imperative that digital currency is the finance of the future, and wants to be shaping that future,” Chorzempa said.

As of June 30, consumers and corporates have opened 24m e-CNY wallets and spent Rmb35bn ($5.4bn) in 71m transactions for paying utility bills, buying food or taking the metro, among other things, according to a recent PBOC white paper. 

The Games next February may be a small trial run for internationalisation of China’s CBDC. Chorzempa said that in the long-term, authorities in Beijing would “be happy to see countries using e-CNY where they are currently using dollars”.

The PBOC’s white paper emphasised that e-CNY was “designed mainly for domestic retail payments at present”, but left open the possibility of exploring its use for cross-border payments in future, and regulators in the US are taking the competitive threat seriously.

In a speech at the Aspen Institute on Friday, US Federal Reserve governor Lael Brainard said the rollout of the e-CNY was proof that the US needs to work on its own digital dollar.

“The dollar is very dominant in international payments, and if you have the other major jurisdictions in the world with a digital currency, a CBDC, offering and the US doesn’t have one — I just, I can’t wrap my head around that.”

Fintech Fascination

More stories from the industry that caught our eye this week

Square bets big on BNPL with Afterpay deal The recent fintech M&A boom hit a new high following Sunday’s news that Square, the payments group led by Twitter founder Jack Dorsey, has agreed to buy Australian buy-now-pay-later specialist Afterpay. Assuming it is approved by Afterpay shareholders, the $29bn deal will be the largest takeover in Australian history — underscoring the huge appetite for BNPL. It will also add another string to Square’s bow as its Cash App transforms from a fast money transfer service into a potential rival to big banks.

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Monzo’s regulatory woes Monzo, the British digital bank, is being investigated by the Financial Conduct Authority over potential breaches of money laundering laws. It is far from the first time a fintech has drawn scrutiny over its compliance systems (see also N26), but is by far the most high-profile formal investigation launched by the UK regulator. The revelation took some of the shine off an annual report that was better than expected after Monzo took a battering early in the coronavirus pandemic. The company is still some way from profitability, and will need to raise further cash from investors in the next few months, but cost cutting and new product launches helped keep losses stable. Read more in our exclusive interview with Monzo chief executive TS Anil.

The hedge fund driving up fintech valuations From neobanks (Revolut) to corporate credit cards (Brex) to business payments (Stripe, Checkout and Rapyd), Tiger Global has been involved in many of the fintech trends featured in this newsletter in recent months. The investment group has gained notoriety for throwing so much cash at start-ups — and doing it so quickly — that old-school Silicon Valley venture capitalists are scrambling to adapt. In this Big Read, the FT’s Miles Kruppa and Benjamin Parkin explain how the 20 year-old company has grown into a $70bn giant, and examine whether it will be able to continue.

Quick Fire Q&A

Stay up to date with up-and-coming disrupters. Each week we ask a fast-growing fintech to introduce themselves and explain what makes them stand out in a crowded industry. The recent spate of M&A activity and massive fundraisings have highlighted how digital payments are growing in Europe, Asia and North America. This week, however, we spoke to a company that is trying to do the same in Africa. Yoco started off with portable card readers á la Square and iZettle, and has since expanded into online payments too. 

When were you founded? Yoco launched in South Africa in late 2015.

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Where are you based? Yoco’s HQ is in Cape Town, South Africa, but we work across Emea with a distributed team.

Who are your founders? Chief executive Katlego Maphai, chief business officer Carl Wazen, chief technology officer Lungisa Matshoba and chief financial officer Bradley Wattrus

What do you sell, and who do you sell it to? Yoco is a financial platform for small businesses. It offers in-person and online payment acceptance alongside an ecosystem of financial and software tools.

How did you get started? Yoco began with the meeting of minds between a diverse group of friends . . . [over how] to remove barriers and open up possibilities for entrepreneurs to thrive.

How much money have you raised so far? The latest investment round [announced last month] brings the total funds raised to date to $107m.

What’s your most recent valuation? We are not disclosing valuation, for now, but we are ambitious and currently focused on product development, talent acquisition and small business support.

Who are your major shareholders? Some include Dragoneer Investment Group, Velocity Capital Fintech Ventures, Orange Ventures, FMO and Quona Capital, Breyer Capital, Greyhound Capital, HOF Capital, The Raba Partnership, CRE Venture Capital, 4DX Ventures and TO Ventures.

There are lots of fintechs out there — what makes you so special? We are unique in our focus on market creation for the small businesses excluded from the formal economy. We use innovation to remove barriers, tackle inequality and foster prosperity.



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