The COVID-19 crisis has had little impact on China’s interest in becoming the first major economy to distribute digital currency to the central bank. On the contrary, the digital currency / electronic payments project appears to be gaining momentum.
In Shenzhen, for example, 100,000 locals received a total of 31 million digital yuan for free this month through lotteries, and residents can now use ATMs to convert digital yuan into cash on a test basis.
Meanwhile, the Chinese Postal Savings Bank is said to have developed wallet cards to store digital yuan on them, which is beneficial for the elderly who do not always like electronic currencies. The government that seems to be dealing with all kinds of problems has recently brought Alipay into the digital yuan system in Shanghai area.
Why is this rush?
Simply, they see it as an important competitive advantage in the digital economy, given the nature of markets and governance in China, and its willingness to gain a revolutionary advantage in the CBDC race, ”Kevin D’Souza, professor of business, technology and strategy at Queensland University of Technology, told Cointelegraph. We can expect China to triple its efforts in the future. ”
“China has made great strides in creating and improving the design and conceptual framework for the CBD,” Eswar Prasad, professor of economics at Cornell University and a senior fellow at the Brookings Institution, told Cointelegraph. “China has made great strides in creating and improving the design and conceptual framework of its CBD.” It provided more detailed physical-to-digital copies of the central bank’s retail funds. Actually a lot. ”
Upon completion of the People’s Bank of China, it was announced that the digital yuan will be used as the M0 currency, that is, as cash in circulation in the form of coins and banknotes. Preparations have been intense: the pilot trials for 2020 in four regions – Shenzhen, Suzhou, Chunan and Chengdu, as well as an Olympic winter resort – while Agenda 2021 includes trials in five regions – Shanghai, Hainan, Changsha and others. Qingdao and Dalian. And Xi’an. According to a review from Beijing, these test areas have focused on ease of use.
The key phrase in the report was that “both phones are broken.” The Chinese digital yuan does not require an internet connection, which is critical in a country where many remote areas are left without internet or with intermittent internet connections.
Issues like compatibility and privacy still exist.
However, China has not solved all the problems associated with the central bank’s digital currency. “There are still important issues that need to be addressed in terms of scalability, interoperability and transaction privacy for DC / EP users,” Prasad told Cointelegraph.
“There will still be some technical issues before full implementation, but major issues have already been resolved during the testing period,” Yu Xiong, vice president of international affairs at Surrey and head of business analytics at Surrey Business School, told Cointelegraph. … the usability issue has been largely resolved.
Chinese consumers are flexible when it comes to introducing new payment methods, and the digital RMB wallet is expected to be similar to the one already widely used in China on non-bank payment platforms like Alipay or WeChat Pay, Xiong explained. Users will download RMB digital wallets to their smartphones, where digital currencies can be stored. “All trading platforms and online communications will work, so there will be no problems with the infrastructure,” he added.
It is important to note that the user does not need to open a bank account to get started – just provide a unique form of identification such as a driver’s license or a mobile phone number. Xiong suggested that a digital yuan would have social implications for China, as it could bring many poor people into the financial system and reduce poverty.
Elsewhere, China is mostly cashless, so the digital yuan will not bring drastic changes to the retail trade. But for reasons that go beyond social justice and explain why China is so committed to the digital yuan, D’Souza told Cointelegraph:
“The reason why China is investing in this is to improve the reliability and diversification of the currency. Today the yuan is not the main currency. However, in the future, they believe that CBDC will take a leading position in the cryptocurrency market.”