The city of Suzhou will launch the second lottery to distribute the digital yuan on Dec. 12 and trial previously untested features, Chinese media reported.

Why it matters: China is racing to be the first major country to issue a central bank digital currency. If successful, it could spearhead a new era of government oversight of the monetary system.

  • Details about the digital currency have been scarce, and testing has mostly been limited to select individuals.

READ MORE: INSIGHTS | China’s digital currency has a long way to go

Details: The city of Suzhou in eastern Jiangsu province will distribute 100,000 red envelopes. Still undetermined are key details such as the amount of digital currency each will contain, where users can spend the currency, as well as the method of distribution, the report said.

  • The Suzhou pilot will test the digital currency’s offline capabilities, which use Near Field Communication (NFC), a set of protocols for mobile devices to communicate in close proximity.
  • NFC allows users to send and receive money even when they are not connected to the internet, authorities have said.
  • Merchants in Suzhou’s Xiangcheng district, where the pilot will be conducted, have already installed NFC QR codes, the report said.

Context: In October, a district of Shenzhen distributed through a lottery RMB 10 million ($1.48 million) in 50,000 red envelopes of RMB 200 each. It was the first digital yuan test that was open to the public.

  • The lottery opened on Oct. 9, and the envelopes were usable between Oct. 12 and 18.
  • Shenzhen users were reportedly unimpressed by the digital yuan, saying it was very similar to digital payment platforms Wechat Pay and Alipay.
  • On Oct. 25, China’s central bank issued a draft regulation to legalize the digital yuan.
  • The new law has “opened up further space for pilot cities to test and build the digital yuan payment infrastructure,” Flex Yang, CEO of digital asset lender Babel Finance, told TechNode.
  • The digital yuan is being tested in the southern city of Shenzhen and Suzhou as well as Chengdu in southwestern Sichuan province and Xiong’an in northern China.
  • Until Shenzhen’s lottery, only individuals whitelisted by authorities had been able to participate.
  • More than RMB 2 billion worth of the digital yuan have been processed in more than 4 million transactions, Yi Gang, the deputy governor of the People’s Bank of China said on Nov. 1.

READ MORE: Digital yuan law, rig maker Ebang pushes abroad: Blockheads

Eliza Gkritsi

Eliza is TechNode's blockchain and fintech reporter. When she isn't obsessing over the rise of distributed ledger technology in China, she helps with editing.