China on the cashless way!
With its recently announced Digital Yuan and an already well-established infrastructure of mobile payments, China could be one of the first economies to go cashless.
While the Chinese government launched its national digital currency DCEP (Digital Currency Electronic Payment, DC/EP), often dubbed Digital Yuan, only in late 2020, they are actively building a full ecosystem, aiming at making the digital Yuan experiment appear as the pattern for all future CBDCs - Central Bank Digital Currencies. Besides developing domestic electronic payments and keeping a tight control on money movements, China intends to use its Digital Yuan increasingly in international settlements. International balance of power is at stake as China sees international digital currencies such as Facebook’s projected Libra as a threat to its monetary sovereignty: the Chinese government dogma is that digital currencies should only be issued by governments and central banks.
Originally, PBOC – People’s Bank of China – the Chinese Central Bank first trials in Shenzhen, Beijing and Suzhou were focusing on the Digital Yuan implementation through mobile phones. Early January, the medical staff at the Tongren Hospital Shanghai Jiaotong University School of Medicine received a “hardware wallet” allowing them to complete transactions in Digital Yuans at the hospital cafeteria. The “hardware wallet” is actually a banking card shaped device equipped with an LCD showing the transaction amount, the remaining balance on the account and more information. Transactions are completed in contactless offline mode.
Further to this experiment, the hospital plans to extend the acceptance of the card for diagnosis, treatment and parking fee payment.
In a further move to establish the Digital Yuan as a real currency, the Agricultural Bank of China has installed ATMs at branches in Shenzhen that allow to exchange cash for Digital Yuan and vice versa. Those ATMs are compatible with smart phones, the main tool used by Digital Yuan account holders.
The Digital Yuan ecosystem is building up as eight major banks in mainland China (Bank of China, China Construction Bank, China Merchants Bank, Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of Communications and Postal Savings Bank of China) and Hong Kong-based China CITIC Bank, have now introduced or are in the process of introducing digital wallets that support Digital Yuans in addition to their existing wallets in Ren Min Bi Yuans.
All these initiatives : digital wallets, banking cards and ATMs, aim at making the use of Digital Yuan as easy as possible and the interoperability with the traditional currency as seamless as possible. In the regions covered by the trials, users are able to spend their Digital Yuans in-store with QR codes and NFC-based purchases on their mobile phones, and also make online purchases from the JD.com virtual mall. Of course, in the mid-term, Digital Yuans should be able to be used to purchase any product from any merchant.
The Chinese government has the 2022 Winter Olympics on the horizon and anticipates that, by this time, the Digital Yuan will be accessible through a variety of contactless wearables. These devices include “ultra-thin card wallets, visual card wallets and badges, watches, bracelets and other wearable device wallets,” Beijing Daily says. Foreign visitors to the Winter Olympics will also be able to use Digital Yuan during the event.
If the introduction of the Digital Yuan keeps going at the same pace, it will be the fastest adoption of a new payment means since the beginning of humanity. It will also be a demonstration of the efficiency of the world’s first official e-currency over the nice but idealistic model of government-independent issuer-less digital currencies.