The digital currency run by China’s central bank—known as the digital yuan or eCNY for short—is seeing new uses. A recent report indicates that it has received upgrades, including smart contract functionality.
With the integration of digital yuan into Meituan, a popular Chinese app for retail and food delivery services, users can now use this currency to pay for products from local merchants. The inclusion of smart contract functionality allows them to interact with those merchants in new ways—like paying additional fees or having preferential treatment at restaurants during high-demand periods by using their online reputation score
The addition of smart contract functionality to the digital yuan will significantly expand its capabilities beyond basic financial transactions.
Smart contracts are computer protocols that facilitate, verify, or enforce the negotiation of a contract. They allow for more automation and fewer intermediaries, making digital currencies such as the Digital Yuan more versatile than fiat money.
Besides this new functionality, major Chinese tech companies are also driving the adoption of the digital yuan. In a recent address, a billionaire accused Beijing of stifling innovation while characterizing Chinese banks as pawn shops—in other words, he said it was hard to get loans from these institutions.
Many experts believe that China’s tech giants will play a crucial role in promoting the digital yuan—with their resources and infrastructure, these companies can make sure that people learn about it.
It’s worth noting that China isn’t the only country working on developing a digital version of its currency. Central banks around the world are exploring different models for such applications and experimenting with them. China’s digital currency is considered to be the most advanced and well-funded of any in existence.
As digital currencies become more popular, we can expect to see the rise of new applications for national currency such as China’s yuan.
The new use cases and functionalities demonstrated by China’s Central Bank Digital Currency (CBDC) provide insight into the future of digital currencies.
The integration of smart contract functionality and the drive for adoption by tech giants in China are some of the most notable developments in the digital yuan space. These advancements have huge implications on how people will pay for goods and services, both locally—in China —and globally.