People’s Bank of China issues digital yuan trial progress report

Nearly 21m (20.87m) personal and 3.51m corporate digital yuan wallets have so far been issued during China’s ongoing trials of its central bank digital currency (CBDC), the People’s Bank of China (PBOC) has revealed.

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To date, the digital currency — also known as e-CNY — has been used to make nearly 71m transactions with an overall value of about 34.5bn yuan (US$ 5.33bn) and has been used “in over 1.32m scenarios, covering utility payment, catering service, transportation, shopping and government services,” PBOC says.

The figures are revealed in the central bank’s newly released ‘Progress of Research & Development of E-CNY in China’ white paper, which reports on the digital yuan trial and confirms that “the pilot programme now spans the Yangtze River Delta, the Pearl River Delta, the Beijing-Tianjin-Hebei region and China’s central, western, north-eastern and north-western regions”, including those in the cities of Beijing, Shenzhen, Suzhou, Xiong’an, Chengdu, Shanghai, Hainan, Changsha, Xi’an, Qingdao and Dalian.

The pilots have been “designed to test the reliability of theories, the stability of systems, the usability of functions, the convenience of processes, the applicability of scenarios and the controllability of risks,” the white paper says.

Key concepts 

The white paper also lays out the key concepts and objectives of the programme and the principles on which the digital yuan has been designed, and provides further details about specific features of the CBDC.

In particular, it clarifies the concept of “managed anonymity” in relation to the privacy of transactions conducted using the digital yuan, saying that the CBDC ecosystem “follows the principle of ‘anonymity for small value and traceable for high value’ and attaches great importance to protecting personal information and privacy. It aims to meet the public demand for anonymous small value payment services based on the risk features and information processing logic of current electronic payment system.”

The white paper confirms that the digital yuan ecosystem will operate on a two-tier framework “whereby the PBOC is responsible for issuance and disposal, inter-institution connect and wallet ecosystem management”. 

It explains that “the two-tier system can fully tap authorised operators’ advantage in resources, talents and technology to build a market-driven system that promotes innovation and competition.

“On top of that, since the public is used to accessing financial services via commercial banks, the two-tier system can increase the public acceptance of e-CNY.”

Technical framework

The white paper confirms that authorised operators — including banks and mobile payments platforms including Alipay and WeChat Pay — “assign different types of digital wallets to customers based on the strength of their personal information identification, and set per-transaction and daily limits as well as maximum balance according to the strength of real-name information”.

The types of digital yuan wallets being trialled include personal and corporate wallets, software and hardware wallets, parent wallets and sub-wallets, the white paper states.

Of the technical framework, it confirms that “the e-CNY system combines centralised architecture with distributed architecture, forming a hybrid technical framework featuring the co-existence of dual states, namely, steady state and agile state, as well as the integrated development of centralised and distributed architectures.”

“Digital fiat currency is a new thing. Its impact on the economy and the financial sector can be assessed through pilot tests and practices,” the white paper adds.

“The PBOC is carrying out e-CNY pilot programmes with the focus on the implications of e-CNY for monetary policy, financial markets and financial stability in the pilot regions. Based on the findings of the pilot programmes, the PBOC will iterate and improve the e-CNY design accordingly.”

Next phase 

Although reports that China would officially launch the digital yuan following the 2022 Winter Olympics in Beijing appeared earlier this month, the white paper says there is still “no preset timetable for the final launch”.

During the next phase of the pilot, PBOC “will further expand text scenarios to cover all possible scenarios in selected pilot regions”, “will improve relevant institutional arrangements and rules” and “strengthen research on major issues” including the digital yuan’s “deep impact on monetary policy, financial systems and financial stability”, as well as “international exchanges of views on digital fiat currency”.

The English version of the 16-page ‘Progress of Research & Development of E-CNY in China’ white paper can be downloaded here.

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