As we watch the amazing feats on snow and ice in Beijing, we learn of new innovations in skis, clothing and training. Yet it's the innovations in the Olympic Village that will make the greatest impact in years to come.
During the 2008 Summer Olympics in Beijing, spectators and participants would have carried paper money to buy snacks and souvenirs. In a matter of 16 years, China has moved from a predominately paper-based money system to a blockchain-based money system.
The 16-year journey from paper to blockchain is less about technological innovation as it is about regulatory and cultural change. With countries around the world being careful about which companies can transmit money electronically, China allowed WeChat and Alipay, two dominant tech companies, to build payment systems within their platforms. In a short period of time, paper disappeared and many payments cleared through these two technology platforms.
Different from buying halal foods on the streets of New York City or a crepe in downtown Paris from street vendors who only accept cash in paper form, many in China have a QR code on their cart, readily accepting electronic payments. The adoption of payment apps throughout China has enabled most citizens to leave their cash behind and use only these apps to make payments, from a taxi cab ride to paying their accountant. Likewise, many companies record a significant amount of their cash receipts from these apps. As a foreign traveler landing in Beijing, it's better to have WeChat or Alipay installed than it is to have paper Yuan in your pocket. This cultural revolution is what has allowed China to continue to move towards a digital-first future.
Over the past year, the People's Bank of China (PBOC) has opened up the pilot program for the eYuan, a Central Bank Digital Currency (CBDC). A CBDC is different from transactions through WeChat or Alipay as they are written to a blockchain instead of a technology company’s database.
The PBOC’s blockchain is based upon the fundamentals of bitcoin and other cryptocurrency projects, but implements the eYuan in a unique way that fits the objectives of the PBOC. For example, a street vendor without internet connectivity can still receive and send transactions; they are queued up until internet connectivity resumes.
Additionally, the eYuan doesn't eliminate banks but makes them central to how the eYuan works. Only the banks can issue eYuan to its customers, and they must keep one Yuan in the bank for each eYuan distributed to its customers. Most governments do not want to disrupt the banking industry and this model continues to put a bank at the center of the monetary system.
While the eYuan is rolling out gradually throughout China, including at the Olympic Games, the impact will be felt globally. Take for example a typical global supply chain payment: using the traditional SWIFT bank payments network, that supply chain payment could take a few days or up to a week to clear and end up in a bank in China. However, with an eYuan transaction, that same payment would travel the world in a few minutes. With supply chains tight, a company in China can ship items based on when the payment is received. Global companies will quickly realize that the best means of payment for their Chinese vendor might be the eYuan. As demand for eYuan moves globally, local banks might look to support their customers by allowing the exchange of eYuan for a local currency.
While the innovation might be in the Olympic Village today, it is not crazy to think that you might be paying for a crepe with this digital currency at the 2024 Olympics in Paris.