China’s digital currency program is set to expand to its capital Beijing and other major cities including Tianjin, Hebei, Guangdong, Yangtze River Delta as well as Hong Kong- Macau Greater Bay Area.
According to an official announcement made by China’s commerce ministry, the digital RMB pilot programs will be led by the Chinese Central Bank, the People’s Bank of China (PBOC). The programs will run in the added regions as well as earlier pilot regions “where conditions permit”, as stated in the announcement.
The ministry further stated that they expect to wrap up the Digital Yuan’s design by the end of 2020, but did not specify the start dates of the programs.
Extensive Testing Is Underway
The new development follows a few earlier critical announcements concerning China’s plan for its digital currency. In April the PBOC stated that the digital Yuan could be ready for use during the 2022 winter Olympics [u1] event that will be hosted by Beijing.
At the time, four major banks were also alleged to be conducting extensive tests on the digital currency in Shenzhen, Xiong’an New Area, Suzhou, and Chengdu, with the release date, speculated to be in mid-2021.
Several tests for the digital Yuan have been reported in 2020. The Bank of China and the Agricultural Bank of China have unofficially released a mobile payments app in April, to test the digital currency’s viability. Although unavailable to the public the test app’s features included a hot wallet, wallet interoperability, and transaction tracking.
Still, in April, another report said that the municipal authorities in Suzhou were planning to pay half of their employees’ May transportation allowances in Digital Yuan.
China’s Digital Yuan Is a Hybrid
According to China Daily, the PBOC’s digital currency electronic payment (DCEP) will be a blend of centralized and decentralized technology, based on both blockchain and traditional finance structures. The PBOC’s Digital Currency Research Institute stated that its value will be equivalent to fiat notes and coins in circulation.
“It is a controllable and anonymous payment instrument system of the digital renminbi.”
This reduces the digital currency to a central bank’s electronic payment system, which represents a tactical move against the US dollar. Unlike other major electronic payment systems in China like WeChat Pay and Alibaba, DCEP’s edge will be its ability to support transactions even without an internet connection through a unique peer to peer feature called “touch and touch.”
With many central banks around the world increasingly showing interest in developing a digital currency, China is by far the closest to issuing a CBDC.