A look at China's digital yuan, in which I argue that on the spectrum from grand monetary revolution to big nothing-burger, it's a lot closer to the latter.

There are three bold claims about the eCNY, but none stand up to scrutiny--at least not yet. (1/x) https://www.economist.com/finance-and-economics/2021/05/03/will-going-digital-transform-the-yuans-status-at-home-and-abroad

The three claims are that it will dramatically enhance China’s surveillance capabilities; that it will allow the state to wield far more control over money; and that digitisation will help the yuan challenge the dollar for global prominence. (2/x)

With all three claims, those seeing great promise or great peril in the digital yuan understate what China is already doing and/or overstate what the eCNY will allow it do. (3/x)

On surveillance: the central bank already has few blindspots, apart from cash itself (which it won't eliminate). The eCNY could lead to more consolidated oversight, but in practice that means going from three centralised networks to one. Not a huge difference. (4/x)

On monetary policy: the key is how modest the eCNY plans are. PBOC is aiming for just a small slice of M0, <5% of money supply! And it will distribute eCNY through banks. Will it get more adventurous in the future? Possibly. But it's wary of messing up the financial system. (5/x)

On yuan vs dollar: politics and policy, not technology, have held back the yuan. China is v cautious on capital controls, hence limiting the yuan's global appeal. And the main cross-border friction is a battery of checks on transfers. Digitisation is unlikely to solve that. (6/x)

Central bank digital currencies may well prove transformative. But the uniqueness of China's financial system -- its existing interventions plus tight controls -- mean that, despite all the recent hype, it probably won't be the one "minting the currency of the future". (7/7)