China’s southern city of Shenzhen will use the central bank’s new digital yuan to provide 10 million yuan of coupons to residents as part of ongoing pilot programs to test the virtual currency, in a sign that it is approaching widespread rollout.
The local government of Shenzhen’s Luohu district will provide residents with 50,000 digital coupons, worth 200 yuan each, which they can spend from Oct. 12 to Oct. 18 in nearly 3,400 designated shops that are capable of accepting digital yuan payments, ranging from supermarkets and convenience stores to gas stations.
The consumption stimulus program is the latest move to expand trials of the digital currency which has been under development by China’s central bank since 2014.
In April this year, the central bank confirmed it was conducting internal trials of the digital currency in four regions including Shenzhen, and in hypothetical scenarios related to the 2022 Winter Olympics in Beijing.
The People’s Bank of China (PBOC) has researched over 6,700 use cases for its sovereign digital currency and wired more than 5000 payments in the national currency to healthcare workers to boost the fight against the coronavirus, said Fan Yifei, a deputy governor of the central bank.
Fan has revealed that so far, the PBOC has processed more than 3.1 million the state-run digital currency transactions worth 1.1 billion Chinese yuan ($162 million) between April and August as a part of its pilot trial of the Central Bank Digital Currency (CBDC).
While presenting a speech at the Sibos 2020 virtual conference event on September 5, Fan stated that China’s central bank has managed to open an estimate of 8,859 corporate digital wallets and 113,3000 consumer digital wallets for residents living in Xiong’an, Suzhou, and Shenzhen as an effort to test the national digital currency.
Fan said that the PBOC has researched more than 6,700 various applications for a national digital currency, including shopping, government services, bill payments, transportation, hospitality, retail, catering services, as well as use cases like barcode scanning, payment, facial recognition, among other technological applications.
He further stated that more than 5000 healthcare workers in Shenzhen’s Luohu district have obtained “red envelops” filled with the digital version of yuan currency to help in the fight against the COVID-19 crisis. The medical workers can spend these digital currencies in particular shops and business premises within the district.
The digital currency’s application in tourism would be examined in the future pilot tests in Beijing, the country’s capital city, in the 2022 winter Olympic games. The central bank talked about such plans in April when it stated that Chengdu, Xiong’an, Suzhou, and Shenzhen were selected as the first settings to conduct the DCEP trials.
The trial tests have been developed to reach other cities such as Beijing, Macau, Hong Kong, the province of Guangdong, Hebei, and Tianjin, and the Yangtze River Delta region. In August, the country’s Ministry of Commerce stated that the government is contemplating to launch other trials in the western and central regions of China in the near future.
China’s national digital currency, commonly recognized as DCEP, is a component of a longstanding program that China’s government launched in 2014. It is an initiative that the government aims to utilize crypto technology to develop geopolitical strength, bypass trade networks, and modernize payments.
“To protect fiat currency from crypto-assets and safeguard monetary sovereignty, it is necessary for the central banks to digitize bank notes through new technologies,” said Fan.
China aims to gain a competitive edge of the development of CBDCs and utilize them as an instrument to help to accelerate the transformation of the nation’s economy. Its testing of the CBDC is ahead of other central banks where the proposed digital currencies are majorly in the decision-making stage.
China’s central bank banned cryptocurrency trading, claiming that they are a potential threat to the country’s financial stability. The CBDC is set to give the central bank the capability of tracking and tracing economic activities in real-time.