The Beijing Government is to give away RMB10 million (US$1.55 million) to residents during Chinese New Year as part of the trials of introducing a digital currency. 50,000 randomly selected individuals will be given RMB200 in digital currency, who can then use the e-CNY through certain apps or the digital wallets of designated stores and restaurants in Wangfujing, one of the most famous and popular shopping streets in China. Successful recipients will be notified of their luck on Wednesday.
They will be able to use their e-CNY online, via the app of the e-commerce platform JD, according to a notice from Beijing Local Financial Supervision and Administration. The e-CNY in the Beijing trial can be used from February 10 to 17. Six banks are participating in the test, being the Industrial and Commercial Bank of China, Bank of China, Agricultural Bank of China, China Construction Bank, Bank of Communications and the Postal Savings Bank of China.
The initiative is part of the trial of the central bank’s digital currency, the e-CNY. Beijing will be the third city, after Shenzhen and Suzhou to have sent the digital yuan to consumers for testing.
China started large-scale, central bank digital currency pilot programs in 2019, and Beijing also plans to expand e-CNY usage to the upcoming Winter Olympics in 2022.
Nine Chinese institutions, including State-owned banks and e-commerce giants have been designated by monetary authorities to develop digital wallets and related technology. The dispersal of the digital money is to test each of their respective digital wallet systems, which should connect the service with some specific spending scenarios, such as payment in bookstores or hotels. Through this, process, a dominant player(s) will emerge and be tasked with developing a mature payment ecosystem.
One of the potential issues is that having different digital wallet operators could lead to data fragmentation or isolation of information. That means the Chinese Central Bank may need to consider ways of controlling transaction costs. The e-CNY’s debut will intensify competition among the nine prospective payment service providers and ultimately change the market structure in the sector. A digitalized renminbi is expected to be rolled out with Chinese residents possessing digital wallets later this year, successful trials permitting.
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