Gold will always be the ultimate goal for athletes at the Olympic Games. But competitors in Beijing this month have another currency to consider for the first time– the digital yuan (or e-CNY).
The new currency is being offered as part of efforts to showcase the currency to the wider world after two years of domestic trials. Visitors and athletes can download an app or get a physical card that stores the currency, or convert foreign bank notes into e-CNY at self-service machines. The virtual currency has been being used to settle Rmb2 million ($315,700) or more of payments a day at the Beijing Olympics, the People’s Bank of China’s governor Yi Gang told a G20 event this week.
Restrictions on visitor numbers to the Games will have played a part in reducing the audience for the digital yuan’s debut, of course. Athletes may also be cautious about experimenting with it, especially the American team, after Republican senators cited espionage concerns and data-security dangers in urging the US Olympic Committee to block their athletes from using it.
Getting more discussion in the international media in the last few days is how the new arrangements must be putting pressure on one of the longstanding sponsorships at the Games, however. For years, cash and Visa cards have been the only means of payment at Olympic venues and Visa is still described on the Games’ website as the exclusive provider of ‘payment services, transaction security [and] pre-paid cards’.
Whether that arrangement still applies is open to question, although the Chinese media is insisting that the deal hasn’t been breached because the e-CNY is a digital format of China’s fiat currency, and not a competitor to Visa.
The IOC is skirting questions about whether the card provider was consulted about the digital yuan’s debut and Visa has said nothing about the situation either, which is probably wise. Unlike American Express and Mastercard, it is still waiting for approvals to operate in the wider China market, where it depends on UnionPay’s network to process payments made on its cards. “Visa knows the Olympics will come and go, and China will still be there. It wouldn’t want to be on the wrong side of the discussion with the Chinese government,” Rick Burton, a former marketing executive at the 2008 Beijing Summer Olympics, told the Wall Street Journal.
Reports on the success of the e-CNY’s spread in China are mixed. About 260 million people have already downloaded the digital yuan app. But the value of transactions is not much more than a rounding error in comparison to the business done on the payment apps of Alibaba and Tencent – about $14 billion in cumulative transactions since the pilot phase was launched two years ago, versus more than $1.5 trillion in flows through the Alipay platform alone in 2020.
Indeed, one of the fundamental challenges for the e-CNY is that Alipay and WeChat Pay are already providing a winning product in a country where cash usage has already dropped dramatically. “If one wants to think about a country where the user case for a digital official currency is quite weak, that country is China,” Eswar Prasad, an expert on the future of money, explained earlier this month, noting that incentives are still insufficient for more customers to switch away from more dominant players.
Another potential tactic for regulators to speed up adoption of the e-CNY is to make life more difficult for the alternative choices. And in this kind of context, platforms like Alipay and WeChat Pay are probably more at risk from the broader push to promote the new currency than international payments processors like Visa. “We’ve already seen actions by the Chinese government to cut down these tech giants to size. And I think it views the digital yuan as one more tool in its toolkit to be able to cut down the power of these giants,” Prasad added.
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