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The use of the e-CNY, or digital yuan, is now being expanded beyond the purchase of consumer goods. Beijing has cracked down on other cryptocurrencies such as bitcoin and instead seeks to provide its own alternative.
China's digital yuan can now be used for wealth management products and bank loans. This move by China's central bank extends the use of the digital currency beyond the purchase of consumer goods.
The e-CNY is currently being used in more than 20 cities throughout China. Although the e-CNY is still in its pilot stages, the scope of the trial has been gradually expanded since its debut in 2020.
The Chinese government has introduced the e-CNY as Bejing has cracked down on bitcoin and other cryptocurrencies, seeking instead to provide a government-sanctioned and controlled digital alternative.
E-CNY adopters are already making use of the digital currency's expanded functionality.
Last week a man purchased an auto insurance policy using the e-CNY, according to reports from Chinese government-funded newspaper Securities Times.
In addition, China Construction Bank Corporation (CCB) now allows customers to use the e-CNY for wealth management products on its mobile app, according to Reuters news agency.
China has plans to further expand use of the digital yuan.
"In the future, digital yuan can be applied in more scenarios such as medical treatment, education, and finance," wrote Zhang Ming, a senior economist at the Chinese Academy of Social Sciences on an online publication in China.
China's central bank claims that the e-CNY hit a transaction volume of 87.6 billion yuan ($13 billion; €12.4 billion) at the end of 2021.
Digital wealth management tools like the e-CNY are not new to China. Alipay, an Ant Group-owned digital payment service provider, has offered similar services since 2013 when it rolled out its own digital money market fund.
Despite success of its fintech giants, China has pushed to expand usage of the digital yuan.
Applications like Alipay require a mobile phone and internet. China's population is highly mobile with over 990 million people using mobile phone services in 2021, accordingto GMSA, but research from the World Bank indicates that 20% of China's population does not have access to the internet.
Earlier this year, China began issuing cards, complete with a small LCD screen that tells users how much money is in the e-CNY account. These cards can be used without an internet connection.
Mechanisms like this fill in gaps where fintech companies cannot by providing "a secure, government backed, free or near free and immediate transfer of money," Richard Turrin, an expert on China's digital currency, told DW.
Edited by: Mark Hallam