China’s central bank released the country’s first white paper on digital yuan on July 16.
Why it matters: It’s the most detailed overview yet of the central bank’s progress for the digital currency.
Details: The white paper (in Chinese), issued by The People’s Bank of China (PBoC), describes the digital yuan’s definition, design principles, operation systems, digital wallets, the scope of existing trials, and the responsibilities of participants.
- The document specifies that the central bank is the sole issuer of China’s digital yuan and that it is a centralized digital currency controlled by the PBoC. Only select commercial banks will be able to “exchange” and “circulate” the currency.
- As of June 30, participants have spent 34.5 billion digital yuan ($5.3 billion) in trials. The currency has opened more than 1.32 million digital yuan trial sites since the end of 2019. Uses include paying utility, dining, transportation, shopping, and government services.
- The central bank said the digital yuan is partly a reaction to Chinese people’s changing habits from cash to cashless and mobile payments. In 2019, mobile payments accounted for two-thirds of all numbers of transactions in China, the white paper said.
- The white paper emphasizes that the primary purpose of the digital yuan is to offer individuals a central bank option for retail transitions, hoping to cut down costs and increase efficiency in payments.
- Short-term foreign visitors will be able to open a digital yuan wallet for daily transactions without opening a bank account in China.
- The 20-page page white paper spends only one page on future plans. It calls for quick passage of a law to make digital currency legal tender. It also calls for more pilot programs and more research, without detail.
Context: China is the first major economy to introduce a national digital currency. After launching the project in 2014, PBoC has spent seven years researching and developing the currency.
- China has recently expanded crackdowns on crypto mining and crypto trading. China banned crypto trading and initial coin offering in 2017 but allowed over-the-counter trading (OTC). Since April, the country’s regulators have cracked down on crypto trading and mining, prompting miners and companies to move out of China.