China rolling out digital yuan pilot cautiously as scams surface
China is proceeding towards the establishment of a central bank digital currency, which is popularly called the digital yuan or the e-yuan, and as is the case with any major rollouts, it is fraught with risks and scams as well.
The country is looking to roll out the digital yuan for all its citizens and it has been carrying on a pilot for the same over the last few weeks that involves 10 million business accounts and 140 million individual accounts. While the rollout so far has been generally smooth with no major problems reported, scams have begun to surface with the modus operandi being similar to those that were used when debit and credit cards were rolled out. This involves tricking people into parting with their data which would then be used to create digital wallets and siphon off funds from the user account. It also involves getting people to make a CBDC payment to another wallet which led to the funds being lost forever for the client.
China has introduced different levels of wallet with the most basic wallet requiring the user to just have a phone number but it has severe transaction limits associated with it. The most advanced wallet with very high transaction limits is the one in which the user has to go to a bank and do the verification and KYC manually. But for a large and diverse country like China, there are indeed going to be several challenges and it may also happen that many people may not even opt to go for CBDC for payments and may choose to use other forms of digital payments or cash.
So far, privacy concerns have not been raised as it is pretty much clear that the government and the regulators would be monitoring most of the transactions anyway, at least at a basic level. But depending on how the rollout goes and the adoption that is seen in the mainstream, they may also choose to increase the level of scrutiny of the transactions which may remove even the limited autonomy that the users have at this point. But all this will appear as a very good use case for other countries that will follow suit with their versions of the CBDCs in the future.