China: the digital yuan gradually takes root

What does China really want when it comes to crypto-currencies? While recently cracking down on mining activities, the Chinese authorities have announced that the sovereign digital currency, the e-yuan, should be ready in February 2022.

China expels "miners" from its territory

For several weeks now, China has been tightening restrictions on Bitcoin miners, whom it accuses of obstructing its pollution reduction targets. On June 18, authorities in the Sichuan region, China's second-largest Bitcoin mining province, issued a notice requiring the closure of 26 mining farms, places where multiple computers and servers are coupled to validate and secure the recording of transactions on blockchains.

Crackdowns have also been implemented in three other regions: Inner Mongolia, Xinjiang and Yunnan. According to the Communist Party daily Global Times, 90% of China's bitcoin production facilities have been shut down in recent weeks.

These decisions have had an impact on the price of Bitcoin, which, after a series of crashes partly linked to Tesla boss Elon Musk's sensational announcements, has begun a steady slide.

Pressure on financial institutions

After cutting off electricity to Bitcoin-mining companies, China's central bank asked banks to stop accepting payments made via this crypto-currency. Alipay immediately complied, stating that it would continue to "conduct full investigations and tackle all virtual currency transactions".

Such measures had already been taken in 2013, but failed to completely eradicate crypto-currency trading.

Launch of the digital yuan

These reminders come at a time when the country is promoting its own sovereign digital currency. Customers have recently been selected by the Chinese Central Bank to experiment with e-yuan payment via cell phone.

Cash is used less and less in China. Today, 800 million Chinese pay with WeChat Pay, an application from the Tencent group. However, the digital payment system developed by China heralds a veritable monetary revolution. It will make it possible to track every digital yuan created and to program spending. As a result, the government will be able to keep a permanent eye on the yuan in circulation.

China aims to be the first country in the world to issue a sovereign digital currency. It believes that the massive use of mobile payment and the many Fintechs established on its territory will accelerate its introduction. Although no official timetable has been given for the launch, the Chinese authorities hope to test the e-yuan during the 2022 Winter Olympics.