Key highlights:
- The second major test of the digital yuan is taking place in Suzhou and is much bigger than the previous test in Shenzhen
- Technologically, the second test is also more advanced than the first one
- Two new big Chinese banks are participating in the second test
Is China’s digital yuan a step towards a society without cash?
Suzhou, a city in eastern China, is the host for the second major test of the digital yuan. The first big test program was conducted in October in the city of Shenzhen. Suzhou is dispensing virtual red parcels to its residents in this test. According to reports, the government will give out 20 million yuan to Suzhou’s citizens through a lottery. Virtual red packets will be given to the residents, and each virtual parcel contains 200 digital yuan. The eve of the famous festival called Double Twelve is the time of the distribution. Red packets represent good luck and fortune for the people of China.
Every resident of the city can participate in this lottery by using the public apps of the region. Winners will get the packets through an official digital application.
The digital yuan, often referred to as DCEP, is a CBDC (central bank digital currency). CBDCs are digital currencies, but unlike cryptocurrencies, they are fully controlled by central banks. In contrast, cryptocurrencies such as Bitcoin and Ethereum are decentralized, and aren’t maintained by a central entity. CBDCs are currently being tested by many governments across the world.
Two more big banks are entering the second trial
Four Chinese banks participated in the first trial, and they are all also participating in the second test. In addition, two more banks are coming to the stage this time – the Bank of Communication and the Postal Savings Bank of China. In the first phase, the four banks were the Bank of China, China Construction Bank, Agricultural Bank of China, and the industrial and Commercial Bank of China..
According to the central bank of China, there is no timetable for the launch of the digital yuan. A lot of other trial projects are going on for the digital yuan. Many companies and platforms support the digital yuan, and they are designing digital wallets for the nascent digital currency. China has ambitions of internationalizing its currency, and the idea has inspired many other countries as well.
The second test is more complex than the first one
The second test is much broader than the first one in many different aspects. The amount of money that will be distributed among the residents is double the amount of the previous trial. One other substantial development of the Suzhou test is the presence of JD.com, which is an e-commerce giant. Winners can spend their money via the giant’s mobile app, and it is an impressive action that will surely bolster adoptions.
Technologically, the second phase is more advanced than the first trial. An offline payment feature is available in the second phase – some participants in the trial will have the option of sending transactions even without the internet. This innovation is uses Near Field Communications or Bluetooth to start transactions in offline mode. When one of the transaction parties is connected to the internet, the synchronization with the central bank’s ledger will occur.
