China’s central bank digital currency trials are set to continue, this time in the capital Beijing where the government is giving away 40 million yuan ($6.2 million) to the public. The country plans on launching the digital yuan in time for the Beijing Winter Olympics in February 2022.
In its announcement, the Beijing Local Financial Supervision and Administration Bureau revealed it would give away 200 red envelopes to local residents, with each containing 200 digital yuan (around $31). To participate in the giveaway, the residents must apply before June 7 through the banking apps of the Industrial and Commercial Bank of China and the Bank of China.
This is the second time Beijing residents will interact with the digital yuan. As CoinGeek reported earlier this year, the capital kicked off its CBDC test later than its peers including Shenzhen and Suzhou. At the time, it was the biggest digital yuan test with the PBoC partnering with local establishments for payments in the digital currency. It was the first time that the central bank had chosen to work directly with small mom-and-pop shops instead of the tech and retail giants.
In yet another move to spur the adoption of the digital yuan, a central bank official has proposed a regulatory sandbox for testing of cross-border financial transactions with the CBDC. Xing Yujing, the president of the Shenzhen branch of the PBoC believes the sandbox would further accelerate capital account convertibility between Shenzhen and Hong Kong.
Speaking during an interview with Outlook Weekly, a publication under the state-owned Xinhua News Agency, Yujing stated, “We can explore allowing market entities with strong cross-border financial demand and risk control capability to use digital renminbi in a convertibility pilot.”
The executive believes that the sandbox would create “an expressway of cross-border financial innovation between the two cities.” Shenzhen has already established itself as one of the key CBDC testing venues. In addition, it’s home to some of China’s biggest tech giants including Tencent and Huawei. Its close proximity to Hong Kong makes the cross-border pilot even more feasible, Yujing told the outlet.
The cross-border transfer application of the digital yuan is one that’s especially important. While the PBoC has played down the CBDC as China’s effort to bring down the U.S dollar’s dominance internationally, many experts believe that this is a major target. Currently, the yuan only accounts for 1.95% of global transactions, way lower than the USD which accounts for just under 40%. This is even lower than the Japanese yen which accounts for 3.45% of global transactions.
With the digital yuan, China will be looking to increase its share of global use. The PBoC has already included features like smart contracts to promote its attractiveness to the global audience. However, according to the former PBoC governor Zhou Xiaochuan, this will only go so far.
He stated recently, “It will certainly help cross-border yuan usage, but not significantly. Yuan internationalisation will depend more on policy choices and the progress of China’s reform and opening-up, not just technical factors.”
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