Chinese banks roll out digital yuan wallets

Customers of all six state-owned Chinese banks can now apply for test versions of the banks’ digital yuan wallets as the country rolls out the next phase of its central bank digital currency (CBDC) pilot programme in the city of Changsha.

Peoples Bank of China logo

The expanded trials come as the People’s Bank of China (PBOC) also clarifies its plans for the digital yuan’s co-existence with mobile payments platforms including Alipay and WeChat Pay, the protection of users’ privacy and international interoperability.

The Bank of China, China Construction Bank, Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of Communications and Postal Savings Bank of China have all now begun distributing their own digital yuan wallets to customers applying to join a “trial white list”, according to local media reports

Pilot expansion

In Changsha, the latest city to join the CBDC pilot, “many banks” are now offering customers ‘red envelopes’ containing between 8.8 (US$1.35) and 20 (US$3) digital yuan as well as “preferential activities in conjunction with offline merchants”, including discounts at designated fuel stations when they open a digital currency wallet, Sina reports.

“Changsha has implemented a variety of scenarios to support digital yuan transactions, including public payment of party dues, gas, etc, as well as some consumer scenes such as supermarkets, catering, long-distance passenger transport, gas stations, etc. involving residents’ consumption, as well as postal express delivery, tourism and other characteristic scenes,” the publication adds. 

“With the deepening and expansion of the pilot scope, the application scenarios of digital yuan will gradually extend to wider scenarios such as public services, inter-enterprise payment and settlement, and wages on behalf of others.”

The use of digital yuan for business-to-business transactions is also being tested in the port city of Dalian before a wider public pilot there, according to local media outlet Daguan News.

“Two fuel-trading companies in Dalian… completed the settlement of a fuel transaction. This marked the country’s first business-to-business digital yuan settlement,” the outlet says.

“In the next stage, the digital yuan pilot programme will be further carried out in our city, and more Dalian citizens will have the opportunity to experience the charm of digital yuan.”

CBDC ecosystem

Alongside the expansion of the digital yuan scheme, the PBOC has also confirmed that the CBDC will co-exist with both physical cash and mobile payments platforms such as Alipay and WeChat Pay

“One of the key reasons for the People’s Bank of China developing its own electronic yuan was to provide a backup to Alipay and WeChat Pay, which together make up 98% of the mobile payments market,” director of PBOC’s digital currency research institute Mu Changchun told a Bank of International Settlements seminar, according to a BNN Bloomberg report.

“‘If there is something bad happens to them, financially or technically, that could bring negative impact on the financial system’s stability in China,’ said Changchun. ‘To provide a backup or redundancy for the retail payment system, the central bank has to step up’ and provide digital currency services.”

“Mu also proposed a set of principles for digital currencies’ cross-border application,” the publication adds.

“Currencies supplied by one central bank shouldn’t impede other central banks’ ability to carry out their mandates for monetary and financial stability, he said. They should also avoid the “dollarization” of digital currency, he said.

“He also called for interoperability between central bank digital currency systems and creating a scalable foreign exchange trade platform supported by digital ledger technology.

“Mu tried to allay concerns around privacy, saying the electronic yuan has the ‘highest level of privacy protection’ compared with existing payment methods.

“Users’ personal information will not be available to vendors, unlike with other digital payment platforms, he said.”

China Daily reported in November 2020 that the PBOC is to keep a central database of all transactions made using the digital yuan.

Next: Visit the NFCW Expo to find new suppliers and access free resources