A centuries-old practice is being used by China's CBDC wallet in an effort to increase adoption.

The app for managing digital yuan wallets has been updated to include a digital version of a traditional Chinese method for giving money as a gift, which was rendered obsolete by the rise of digital payment systems.

In an effort to entice potential new users, the wallet app for China's digital yuan central bank digital currency (CBDC) has included a feature that allows users to send money in an electronic version of the country's traditional "red packets."

According to a report published by the South China Morning Post on December 26, the new functionality was made available over the course of the past weekend, approximately one month before the beginning of the Chinese New Year on January 22.

As a symbol of good fortune and prosperity, "red packets," which are known as hongbao in China, are customarily given as gifts of money during celebrations such as the Chinese New Year and other occasions. As the use of digital payments continues to grow, popular regional services like WeChat Pay and Alipay have begun to offer digital versions of the traditional gift.

It has been reported that the e-CNY app allows a red packet to be sent to only one person, or a "lucky draw" can be set up for a group of people who will get a random amount from a pool of funds. WeChat Pay and Alipay both have a feature that is very similar to this one.

Users have the option of selecting a packet cover that expresses best wishes not only for the new year but also for birthdays and for a "prosperous China."

On October 10, digital yuan transactions surpassed the threshold of $14 billion (100 billion yuan), representing an increase of only 14% since the $12 billion (87.6 billion yuan) reported by the People's Bank of China at the end of 2021.

According to a report that was published in the Chinese Workers' Daily newspaper on December 18th, the e-CNY trails are going to expand to include the cities of Jinan, Nanning, Fangchenggang, and Kunming. Previously, in September, the trials were extended to a total of four provinces across the country, one of which, Guangdong, is the country's most populous province.

Despite the rapid expansion of the trials by the government, the most recent reported user base of the e-CNY wallets was in January 2022, with 261 million users having set up a digital wallet. This was the most recent month for which data was available.

It would appear that the Chinese government will need to take advantage of WeChat Pay and Alipay in order to increase the use of its digital yuan.

WeChat had an estimated 1.3 million monthly active users in the September quarter, according to financial reports, while Alipay had over 1 billion annual active users in its fiscal year that ended on August 17, 2020. Both services accept e-CNY.