China Rolls Out Pilot Test of Digital Currency
China
Rolls Out Pilot Test of Digital Currency
Milestone for world’s biggest central banks in path toward launching
electronic payment system
BEIJING—China’s central bank has introduced a homegrown digital
currency across four cities as part of a pilot program, marking a milestone on
the path toward the first electronic payment system by a major central bank.
Internal tests of the
digital currency are being conducted in four large cities around
China—Shenzhen, Suzhou, Chengdu and Xiong’an, a satellite city of Beijing—to
improve the currency’s functionality, the digital currency research institute
under the People’s Bank of China confirmed Monday, in response to a request for
comment.
Chinese domestic and
state-run media outlets reported on the trials over the weekend. The trials
followed years of research by the central bank dating back to 2014.
The new currency, which
doesn’t have an official name but is known by its internal shorthand “DC/EP,”
or “digital currency/electronic payment,” will share some features with
cryptocurrencies including bitcoin and Facebook Inc.’s Libra,
PBOC officials have said. While it won’t boast the anonymity that bitcoin and
other cryptocurrencies tout, China’s central bankers have vowed to protect
users’ privacy.
The intention, China’s central bankers have said, is to replace
some of China’s monetary base, or cash in circulation. It won’t replace other
parts of the country’s money supply, such as bank deposits and balances held by
privately-run payment platforms, Yi Gang, the governor of China’s central bank,
said last year.
The central bank’s
research institute said Monday that the pilot is being launched on a trial
basis, in part to prepare for the 2022 Winter Olympics in Beijing. The research
institute added that the digital currency won’t be issued nationwide or in
large quantities in the near term and said that the test run wouldn’t trigger
inflation.
In Xiangcheng, a district
in the eastern city of Suzhou, the government will start paying civil servants
half of their transport subsidy in the digital currency next month as part of
the city’s test run, according to a government worker with direct knowledge of
the matter.
Civil servants were told
that the new currency could be transferred into their existing bank accounts,
or used directly for transactions at some designated merchants, the person
said.
China is ahead of many
other countries in preparing the launch of an official digital currency. In
recent years, the use of traditional paper
bills and cash has declined sharply, and smartphone payments have
become so ubiquitous that many Chinese people, particularly younger urban
dwellers, no longer carry their wallets or cash for shopping. Instead, they use Tencent Holdings Ltd. ’s WeChat Pay and Alipay, operated
by Ant Financial Services Group, an affiliate of Alibaba Group Holding Ltd.
China’s central bank has
said that shifting to a government-run digital payment system will help combat
money laundering, gambling and terror financing. It has also hailed digital
currencies as a way to improve the efficiency of transactions in its financial
system.
China’s four biggest
state-run banks have joined the central bank in developing the digital currency.
Screenshots of the digital currency’s wallet app, made by one of the banks, Agricultural Bank of China Ltd., circulated
widely online last week.
The screenshots purported
to show a variety of functions, including allowing savers to track transactions
of the new currency, manage their accounts and link the wallet to their
existing bank accounts.
Mu Changchun, a
central-bank official overseeing the research of China’s digital currency, said
in August last year that the currency is “ready to launch,” but Mr. Yi, the
PBOC governor, said later in the year that there wasn’t yet a timetable for the
launch.
—Grace
Zhu contributed to this article.
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