How China’s new digital yuan app makes money programmable

Last week, China has quietly made its standalone digital yuan mobile app available to almost 10% of the population.

Though it is only the latest step in a long, gradual rollout of the central bank digital currency, the standalone app introduces new features to the general public: smart contract-enabled payments and so-called sub-wallets, which facilitate online digital currency payments to participating merchants.

The newly broadened access to the app is thanks to a recent campaign involving Meituan, a food-delivery and bike-sharing app, and the People’s Bank of China. The deal has essentially made the wallet available for any resident in nine major Chinese cities to download and begin using the digital yuan, also called e-CNY.

Since May, it has been possible for Chinese users to activate a digital yuan wallet via the mobile app of one of the six state-owned commercial banks. The Block previously did a hands-on review of the e-CNY wallet accessible from the mobile app of the Industrial and Commercial Bank of China.

The standalone e-CNY mobile app, meanwhile, has thus far only been accessible to a few million people who won lotteries to participate in tests. The Meituan partnership has effectively opened that up to more than 120 million people in nine cities, including Beijing, Shanghai, Shenzhen and Chengdu.

I was recently able to download the standalone app and try it out.

The basic experience of using QR code/scanner for offline payments and making peer-to-peer transactions in the app is similar to that of using a wallet from within a bank’s mobile app. But two unique features are the sub-wallet push activation and smart contracts. This allows more possibilities for network effects to be built around the e-CNY app. And it makes it possible to program the central bank digital currency, for instance to control how it can be used.

Sub-wallets

In the previous review, we detailed how a digital yuan wallet works from inside a bank’s mobile app, including the basic payment functions and how to top-up balances from bank accounts. 

One limitation of that app is that you can only use it to pay physically at a merchant that supports the e-CNY payment. With the standalone e-CNY app, on the other hand, users can initiate online transactions, which are made possible through “sub-wallets.” These are what they sound like: secondary wallets associated with individual merchants. 

After opening the e-CNY app, users can enter a Chinese mobile number to users can activate multiple wallets within the e-CNY app, each tied to one of the six issuing banks. For each bank, the wallet displays a list of sub-wallets that are supported for e-commerce payments — for instance JD.com, Meituan, and the ride-hailing app Didi. 

Users can choose to activate each sub-wallet so that when they shop at JD.com or use a service through Meituan’s mobile app, for example, they can automatically pay with the e-CNY.

There is also an option to activate a wallet developed by Ant Group, called Mybank. But so far no subwallet features have been enabled for this platform.

Smart contracts

The second important new feature of the standalone e-CNY app is that it can support digital currency that has been programmed in certain ways using smart contracts. 

Back in July, when Meituan launched a campaign with the Chengdu government that involved using digital currency to incentivize low-carbon public transportation, it became clear that China designed its central bank digital currency to be programmable.

In its first official white paper describing the system, which was published a few days after the first collaboration with Meituan was revealed, the People’s Bank of China confirmed that the e-CNY is indeed programmable through smart contracts — and that such functions had already been deployed.

The latest Meituan campaign reveals more about the user interface.

Meituan partnered with three of the six state-owned commercial banks last week to give away at least a few dollars worth of the e-CNY — called a “Red packet” — to any interested resident living in Beijing, Shanghai, Shenzhen, Chengdu, Xi’An, Changsha, Hainan, Xiong’An and Suzhou.

As long as participants use the internal download link from Meituan’s app, they will be able to download the beta e-CNY app from the Android or Apple app stores and activate a wallet. The Meituan Red packet will be automatically credited to their e-CNY wallets.

What’s the catch? The free money can only be for riding shared bikes provided by Meituan only. You can’t even use it to pay for other services inside Meituan, such as food delivery or ride-hailing. And you can’t spend the digital currency anywhere outside Meituan or withdraw it to your bank account. 

You can use the wallet to make payments for other things or send money to friends, it just has to be with money that came with no strings attached, like via a top-up from your own bank accounts.

The transaction logs of the Red packet contain a page that explains the coding rules of the free money issuance. At the bottom of that page, there’s a line that reads: “This red packet is technologically supported by smart contracts of the e-CNY.”