Selected employees at China’s largest banks are trialing the country’s much-anticipated digital currency “on a large scale” (our translation), Caijing reported on Wednesday.
Why it matters: The trials extend pilot programs announced by China’s central bank in April but are limited to whitelisted bank employees in four major cities around China.
- Nevertheless, the news indicates that digital yuan’s testing is progressing.
- The Digital Currency/Electronic Payments (DCEP) project, China’s digital currency, is one of the country’s most anticipated financial innovations and is expected to revolutionize the central bank’s control over the yuan.
Details: Whitelisted employees from the Agricultural Bank of China, Industrial and Commercial Bank of China, China Construction Bank, and Bank of China have started using the digital yuan to transfer money and pay for services, anonymous sources from the banks told Caijing.
- These users are required to open digital wallets with at least one of the banks, which are then connected to their bank accounts.
- They then download the digital yuan app, which uses their ID number to check if they are whitelisted to use the digital currency. The app connects to their digital wallets, which in turn connect to their bank accounts.
- The tests are being conducted in Shenzhen, Suzhou, Chengdu, and Xiong’an, a new satellite city near Beijing—all cities in which the currency has previously been trialed.
Context: The digital yuan has been in the works since 2014. In April, limited pilots were announced in the four cities.
- The government plans to test the digital currency during the 2022 Beijing Winter Olympics, but details on implementation are currently limited.
- Despite widespread speculation, there is no official timetable for the national rollout out of the DCEP, which will function as a digital alternative to cash.
- The DCEP is expected to help authorities fight crime and assist the central bank in controlling the circulation of money. The digital yuan will be compatible with existing digital payment technologies from Ant Group and Wechat, but will also compete with them.
- China is one of five countries that is testing a central bank-sanctioned digital currency—it’s also the biggest economy to do so. Other countries also exploring implementation include Ukraine, Norway, Uruguay, the Bahamas, and the Marshall Islands.