Regions across China have launched a series of digital yuan voucher giveaways to drive adoption of the country’s central bank digital currency (CBDC) and encourage consumer spending using the digital currency during the Asian Games and the Mid-Autumn and National Day festivals, according to NFC World.
The latest round of giveaways comes as the People’s Bank of China’s (PBC) Digital Currency Research Institute reports that, since the start of the digital yuan pilot programme in 2020, more than 90% of the digital currency and vouchers distributed during previous giveaway events have been spent and that in some regions uptake has been as high as 99%.
Also, China opened an industrial park dedicated to developing the digital yuan ecosystem on Oct. 11, according to Cointelegraph. This is the first such park dedicated to the central bank digital currency (CBDC), which is also referred to as the e-CNY.
The industrial park is located in the Luohu district of Shenzhen, adjacent to Hong Kong. It is opening with nine residents. According to reports, the district government has announced 10 “initiatives to boost the development” of the digital yuan ecosystem that involve payment solutions, smart contracts, hard wallets and digital yuan promotion.
Incentives are being offered to residents that include up to three years’ free rent. Commercial banks can receive up to 20 million yuan ($2.7 million) for settling there, while startups are eligible for up to 50 million yuan ($6.9 million). Total government support is set at 100 million yuan ($13.7 million). Loans at advantageous rates are also being offered.
The move marks China’s development of CBDCs as a monetary tool. According to Reuters, Lu Lei, deputy administrator for the State Administration of Foreign Exchange (SAFE), stated that CBDCs has “programmable attributes” that can allow them to be used as a M2 currency, rather than just in circulation as a M0 currency as it is now.
The People’s Bank of China first distributed digital yuan to consumers in the city of Shenzhen in a ‘red envelope’ lottery in October 2020. China began letting foreign visitors fund a digital yuan wallet using their Mastercard or Visa credit card earlier this month.
The PBC has undertaken in-depth theoretical research and top-level design
As a pioneer in the study of digital fiat currency, China has carried out a series of studies as early as 2014. In 2016, the PBC established its Digital Currency Research Institute (DCRI), a financial infrastructure designed to advance the development of e-CNY. In 2018, the PBC formulated an e-CNY R&D framework, providing basic guidelines for R&D. In July 2021, the Working Group on e-CNY Research and Development under the PBC published a white paper titled Progress of Research and Development of E-CNY in China, which systematically disclosed the ideas behind the top-level design for the first time.
Specifically, e-CNY adopts a two-tier operation: the central bank performs centralized management to regulate currency issuance and implement monetary policies; commercial institutions make the best of their advantages in resources, talents and technologies to disperse risks and avoid financial disintermediation through a market-driven system that promotes competition.
While advancing the pilot program on e-CNY R&D and application, the PBC has made continuous efforts to improve institutional arrangements so as to strengthen personal information protection. Complying with the Cybersecurity Law, the Personal Information Protection Law, the Anti-Money Laundering Law, and other laws and regulations, e-CNY puts in place a number of institutional arrangements and employs various technical tools to ensure personal information security and prevent potential violations and crimes.
The PBC has progressed smoothly in pilot application and scenarios development
Up till now, the PBC has carried out pilot e-CNY application in selected areas in 15 provinces and municipalities and designated 10 operators based on a comprehensive evaluation. Top-level designs, including the two-tier operational system, have passed all-round tests, and their feasibility and reliability have been verified. An open e-CNY ecology and competition mechanism have effectively mobilized market entities and created a sound environment for fair competition.
A wide array of online and offline e-CNY application models have been built in wholesale, retail, catering, culture, tourism, education, healthcare, and public services, which can be replicated and applied in other areas.
As of August 31, 2022, the pilot areas in 15 provinces and municipalities have recorded 360 million e-CNY transactions with a total value of RMB100.04 billion, and over 5.6 million stores have accepted payment in e-CNY.
Since the beginning of 2022, governments of the pilot areas have launched nearly 30 e-CNY “red packets” campaigns themed „promoting consumption,” „fighting the COVID-19,” ” advocating low-carbon travel,” etc. In addition, commercial institutions have launched multiple market-oriented promotional campaigns. All these have effectively recovered consumption in society and unleashed consumption potential. During the 2022 Beijing Winter Olympics and Paralympics, e-CNY, as a significant achievement of China’s fintech development, was further promoted, satisfying the mobile payment needs of spectators in sports venues and offering a safe and efficient innovative payment method for overseas visitors to China.
The Tanpuhui (Inclusive Carbon Emissions Reduction) platform and green riding activities use e-CNY for transaction settlements, providing new ways to implement the “dual carbon” strategy. Many local governments have introduced e-CNY payment services in their e-government service platforms, enabling online and offline payments to public utilities, and they have used e-CNY to hand out tax refunds, special funds for monthly medical insurance settlement, aid funds for residents in need, and support funds for enterprises with specialized skills, sophisticated operation, unique products, and innovative abilities. In addition, the coverage of e-CNY services has been expanded to incorporate counties and villages to promote rural financial services based on distinctive application scenarios such as agricultural product sales and preferential agricultural subsidies, in a bid to support rural revitalization and the building of digital villages.
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Banking 4.0 – „how was the experience for you”
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