Digital yuan trial heralds inclusive tech future
As China is testing the water before launching central bank digital currency, the country's southern tech hub Shenzhen has taken a further step by conducting another trial run and enlarging its test population by 500,000.
The trial, from April 10 to April 23, aims to cultivate user habits as China is set to use the technology to benefit more people in the long term.
China began piloting its digital currency in select regions across the country at the end of 2019. The digital yuan will be positioned as legal tender, designed to be treated as M0, meaning cash in circulation such as coins and banknotes. It will be issued by the People's Bank of China (PBOC), the country's central bank, to designated commercial banks which will then distribute the currency to the public.
The rapid development of mobile payment requires the government to provide stable and secure retail payment infrastructure. The trials reflect the central bank's prudence in advancing the digital currency to ensure domestic financial stability.
The digital yuan has its uses in the digital era. It will help advance financial inclusion in China, bringing tangible benefits to the Chinese people and the economy.
Unlike non-bank payment platforms that require users to link their bank accounts, a digital wallet can be opened with more personal identification options such as a driver's license or a mobile phone number. That means China's unbanked population and foreign visitors will be included to benefit from the new currency.
The digital yuan can also increase the efficiency of financial operations and lower the costs of financial transactions. It can be transferred freely among commercial bank accounts and non-bank payment platforms, breaking barriers in the industry.
Moreover, the digital currency will ensure that user privacy will be protected from infringement. During a summit at the China Development Forum 2021, Mu Changchun, head of the central bank's digital currency research institute, said China's digital currency has the highest level of privacy protection among existing payment tools.
China is not the only country planning to launch a digital currency. Japan has started experimenting with a digital currency, while Thailand has unveiled a timeline for the testing of its own retail digital currency.
It's worth mentioning that, despite the positive feedback China's recent pilot programs on digital currency have received, it still takes time for the digital yuan to be issued officially, and even longer to be used on a large scale.