Social, Political, and Economic Dimensions of the Instituted Process of Central Bank Digital Currency: The Case of the Digital Yuan

Abstract

Inspired by Karl Polanyi’s argument that the institution of money offers an essential insight into the economy as an instituted process, I examine the extent to which the recent proposals presented in various countries to formulate their central bank digital currencies (CBDCs) actually represent the reactions of governments to the new development paths of their respective society in the digital age. To illustrate this, I scrutinize the particular social, political and economic dimensions of the instituted process which have led to the launch of the digital yuan by the Chinese government in 2021. I also argue that the formulation of the digital yuan is specific to the particular contextual settings of China and their progress. Finally, I argue that the evolving role and long-term influence of the digital yuan in a global context is largely subject to the competition of the world’s major upcoming CBDCs like the U.S. dollar and euro.