In its attempt to improve adoption metrics for the e-CNY or digital yuan, the Chinese government has announced the creation of an industrial park to trigger more excellent ecosystem development for the central bank digital currency (CBDC).
The industrial park is the project of the government of Shenzhen and is situated in the Luohu district. The park launched with nine financial institutions as residents in a healthy mix of commercial banks, fintech firms, and blockchain firms.
“The establishment of China’s first such park marks a significant milestone in the nation’s digital currency development process,” remarked Huang Tuo, head of the Luohu financial services department.
The entities are expected to lay out use cases for the digital yuan as part of the government’s plan to expand retail CBDC use cases. The government is reportedly keen on increasing the number of firms domiciled in the park through incentives.
Commercial banks that set up local shops can get up to 20 million yuan ($2.7 million) from the provincial government in grants, with startups receiving as much as 50 million yuan ($6.9 million). Other incentives include waiving rents for up to three years and bonuses of 500,000 yuan to firms for meeting their revenue targets.
Firms building in the industrial parks have the added incentive of accessing loans with favorable interest rates. They will be given the exclusive rights to set up digital yuan experience centers. Zeng Zhaoxiang, deputy director of Tianyu Information, cited Luohu’s deep blockchain talent pool as a reason for his firm’s decision to establish operations in the industrial park.
“We look forward to the rapid aggregation and formation of the digital RMB ecosystem within the industrial park and we hope to achieve synergistic effects in the industrial chain and jointly promote the development of the park,” said Zhaoxiang.
Alongside the park’s launch, the government outlined ten initiatives to promote digital yuan usage in the region, including creating a 100 million yuan ($13.7 million) fund and integrating hardware wallets with smart devices.
Triggering increased adoption
The People’s Bank of China (PBoC) has been exploring ways to improve the adoption metrics for the digital yuan ahead of its official launch. Despite racking over 200 million users, the CBDC faces competition from existing payment options like WeChat Pay and Alipay, with their first-mover advantage.
To even the odds, the PBoC has rolled out several intuitive features, including the ability of users to top-up their digital yuan app balances using Visa (NASDAQ: V) and Mastercard (NASDAQ: MA). Currently, the central bank is experimenting with offline payments, a move expected to be a jolt for CBDC adoption rates.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: Finding ways to use CBDC outside of digital currencies
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