A former official of the People’s Bank of China (PBOC), the country’s central bank, has expressed disappointment that China’s digital yuan is seeing little use.
Xie Ping, a former PBOC research director and current finance professor at Tsinghua University, made critical public comments about China’s central bank digital currency (CBDC) at a recent university conference, according to a Dec. 28 Caixin report.
Xie noted that cumulative digital yuan transactions had only crossed $14 billion (100 billion yuan) in October, two years after launch. “The results are not ideal,” he said, adding that “usage has been low, highly inactive.”
Despite the government’s rapid expansion of the trials and new wallet features to try to attract users, a January PBOC report stated that only 261 million users had set up an e-CNY wallet.
This compares to around 903.6 million people that utilize mobile payments in China, according to a 2021 China UnionPay report.
The former central banker said the use case of e-CNY “needs to be changed” from its current use as a cash substitute and opened to other uses such as the ability to pay for financial products or connected to more payment platforms to boost adoption.
He compared the digital yuan to other third-party payment systems in the country such as WeChat Pay, Alipay, and QQ Wallet, which allow for investments, lending or loans. He said they “have formed a payment market structure that has met needs for daily consumption.”
Some third-party financial apps are e-CNY compatible but see little use, as Xie said “people are used to” using the original service and change “is difficult.”
Such criticism of Chinese government initiatives is rare from former officials and signals the country may be seriously struggling to gain traction on its CBDC initiative.
The government has rapidly expanded e-CNY trails most recently in December to four new cities. It was previously expanded in September to Guangdong province, its most populous, and three others.
New features were added to the e-CNY wallet app in a bid to attract users in time for Chinese New Year that added functionality to send digital versions of traditional red packets or red envelopes (hongbao) containing money — a popular custom during festivities.
It’s been a torrid year for investors, and not just those in crypto, with United States (U.S.) bonds experiencing their worst year in centuries and U.S. stocks pulling back nearly 20% since 2022 began.
As of Nov. 30, a Financial Times report noted that a traditional portfolio consisting of 60% stocks and 40% bonds will have seen its worst performance since 1932, when the U.S. was in the midst of the Great Depression.
An index tracking the performance of U.S. companies in the industry recorded a loss of 35.76% for the year.
Household tech giants such as Netflix, Meta, Zoom, Spotify and Tesla have all had particularly difficult years as well with their share prices falling in the range of 51% and 70%, according to Yahoo Finance.
Even the “safe as houses” real estate sector has started to show signs of pain, with the most recent data from the Federal Housing Finance Agency showing that U.S. house prices were stagnant through September and October.
These stock and sector declines may help put the current crypto winter into better perspective, noting that total crypto market cap fell from $2.25 trillion to $798 billion throughout the year, representing a drop of 64.5%, and crypto billionaires recorded huge losses.
Some of the crypto crises that have occurred throughout 2022 include the bankruptcies of FTX, Celsius and Three Arrows Capital, as well as the collapse of the Terra network, among others.
According to a Dec. 30 tweet by investment analyst Andreas Steno, “every single asset class” is down significantly in 2022, and real estate is soon to follow.
Avraham Eisenberg was arrested in Puerto Rico on Dec. 26 on commodities fraud and manipulation charges relating to the $110 million exploit of the decentralized Mango Markets exchange. Eisenberg had self-identified as the actor behind what he called a “highly profitable trading strategy” and insisted that he had taken “legal open market actions, using the protocol as designed.”
Eisenberg’s arrest predictably lit up crypto Twitter, with some observers paying particular attention to the fact that commodities fraud charges were being pressed in a case involving a crypto coin:
“AVRAHAM EISENBERG, the defendant, willfully and knowingly, directly and indirectly, used and employed, and attempted to use and employ, in connection with a swap, a contract of sale of a commodity in interstate and foreign commerce.”
Eisenberg had manipulated the price of the exchange’s MNGO coin relative to the USDC stablecoin and then took out loans against his collateral. For this, Eisenberg was charged with commodities fraud. In the charges against Eisenberg, U.S. Federal Bureau of Investigation special agency Brandon Racz wrote:
“I understand that virtual currencies, such as USDC, are ‘commodities’ under the Commodity Exchange Act.”
The agent’s understanding that stablecoins are commodities is only partially backed up by government policy, although it cites the McDonnell case prosecuted by the U.S. Commodities Futures Trading Commission (CFTC) as precedent. The claim that USDC is a commodity is not as controversial as claiming the same for MNGO, but may have been a conscious choice.
The legal strategy behind the DOJ’s choice of the Commodity Exchange Act (CEA) to prosecute the case seemed to be grounded in expediency. For one thing, the CEA addresses price manipulation directly.
In addition, the CFTC is often seen as taking a softer approach to crypto regulation than the SEC, although that perception is disputable.
This Daily Dose was brought to you by Cointelegraph.