China’s Digital Yuan Used for Payment in Country’s Financial Markets

China’s Dalian Commodity Exchange has successfully used the digital yuan for fees settlement in the nation’s futures market, making it the first real application of the People’s Bank of China (PBoC) issued digital currency in the finance sector, according to a report by China Securities News Network on August 23, 2021.

Digital Yuan Facilitates Cost-Efficient Payment 

In a first, China’s central bank digital currency (CBDC), which is also known as the digital yuan, DCEP, digital renminbi or e-CNY, has been successfully used for payment by players in the country’s futures market.

Per sources close to the matter, Dalian Commodity Exchange, a non-profit, self-regulating exchange that has been in existence since 1993, used DCEP to pay storage fees to the delivery house named Dalian Llangyan Group Storage and Transportation Co.

Notably, the transaction was jointly facilitated by the Dalian branch of Bank of Communications, as well as the Dalian branch of the Bank of China, with the parties claiming that the digital renminbi offered significant cost-efficiency.

Jiang Bin, manager of Dalian Liangyun Group Storage and Transportation Co., Ltd said:

“Compared to traditional bank remittance payment systems, the digital renminbi payment for storage fees comes with zero handling charges, superfast payment processing, and more.”

DCEP Playing an Important Role 

Chinese authorities have been doing everything within their powers to permanently shut out public cryptocurrencies like bitcoin (BTC) from the country in order to give the digital yuan a chance to flourish and it appears the move is gradually paying off.

A spokesperson for the DCEP project has reiterated that the promotion of the digital yuan in the country is very important for the continuous development of the nation’s technology, economy, and society in general.

While there have been several successful trials of the digital yuan in real-life scenarios in recent months, the payment solution has not been used in the financial markets. With this latest milestone, the team says it firmly believes that in the near future, DCEP will power business innovations and gain significant traction in the financial markets.

According to the Bank of International Settlements (BIS), at least 80 percent of central banks across the globe are working on their CBDC, with a handful of them already in the advanced stages of the project. 

As reported by BTCManager on August 19, 2021, the Bank of Thailand (BOT) has revealed plans to roll out its CBDC in Q2, 2022.

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China: State-Owned Banks to Task Employees With the Promotion of Digital Yuan Wallet

China continues to scale up efforts to test its upcoming digital yuan, as six state-owned commercial banks have added the responsibility of promoting the Chinese central bank digital currency (CBDC) wallet on employee assessment.

Employees to Get Users for Digital Yuan Wallet

According to local news media on Tuesday (July 6, 2021), the Industrial and Commercial Bank of China and Bank of Communications, along with four other Chinese banks will task each employee to publicize the digital yuan wallet to 200-300 people in a year. 

To enable increased adoption of the digital yuan wallet, the banks aim to offer small gifts to users. Some of the gifts that would be used to attract users include Chinese knots, laundry detergents, umbrellas, data cables, tissues, cardholders, among others. Meanwhile, the number of CBDC wallet signups would determine the end-of-year bonus given to each branch of the Chinese banks. 

Chinese financial institutions have been actively involved in the trial and promotion of the digital yuan. As reported by BTCManager back in April, six major state-owned banks pushed the use of China’s CBDC over existing payment options WeChat Pay and Alipay for a shopping festival. 

In February, the Postal Savings Bank of China (PSBC) created a biometric hardware wallet for efficient digital yuan payments. The Agricultural Bank of China (ABC) earlier developed the first digital wallet for the Chinese CBDC, and later designed a mobile application to enable digital yuan trials. 

China continues to carry out extensive e-CNY tests across different cities in the country. In June, workers in Xiong’an New Area received salaries in CBDC powered by blockchain technology. The government is also looking to trial the digital yuan on international visitors and athletes at the forthcoming 2022 Beijing Winter Olympics.

Despite the Chinese central bank’s efforts at promoting the CBDC, reports show that users seem unimpressed. According to some respondents, they preferred to use existing digital payment solutions offered by major companies like Alipay, while some other expressed privacy concerns, stating that the government could trace transactions. 

Meanwhile, an ex-official of the People’s Bank of China (PBOC) said the digital yuan was not designed to monitor users’ transactions.

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CBDC: Chinese Residents Can Now Convert DCEP to Cash at ATM Points

The Industrial and Commercial Bank of China (ICBC), has now made it possible for Chinese residents to easily exchange their DCEP, the nation’s digital renminbi for fiat yuan and vice versa, at thousands of automated teller machine (ATM) locations in the country, according to a report on June 18, 2021.

ICBC Introduces Digital Yuan-Cash Conversion

While apex banks in various jurisdictions are now in the advanced stages of their digital currency projects, China remains head and shoulders above its peers and the Asian giant has reached yet another significant milestone in its central bank digital currency (CBDC) journey.

Per sources close to the latest development, the Industrial and Commercial Bank of  China (ICBC), a state-owned financial institution that has been in existence since January 1984, has now made it possible for people to easily exchange their fiat renminbi to the digital yuan and vice versa at more than 3,000 ATM machines in the city of Beijing.

Notably, the ICBC has become the first commercial bank in the country to add support for fiat-digital yuan conversion at ATMs in the entire nation, alongside the Agricultural Bank of China (AgBank), one of the country’s “big-four” banks, which has also added the feature at over 10 automated teller machines in the Wangfujing shopping area of Beijing.

CBDCs Becoming a Thing 

So far, China’s CBDC project has been working out as planned, as the People’s Bank of China (PBoC) has successfully carried out several trials of the digital yuan in various cities of the nation in recent months. 

Though reports have it that early users of DCEP are not entirely excited over it, this June alone, China’s central bank has given out $6.2 million worth of its digital yuan token to residents participating in the latest phase of its CBDC trial and the country is now looking to start paying workers’ salaries with the digital currency. 

Just over a decade since Satoshi Nakamoto created the world’s first cryptocurrency, bitcoin (BTC), thousands of distributed ledger technology (DLT) based digital currencies have been launched, providing the masses with a faster and cost-efficient way of making payments and exchanging value globally.

The success of bitcoin and other cryptocurrencies over the years has spurred traditional financial institutions to start paying close attention to blockchain technology, especially in terms of developing their own digital assets. The Bank of International Settlements (BIS) has predicted that at least 20 percent of the world population will have access to CBDC by 2024.

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China’s CBDC Testing Advances along 19.25M Yuan Distribute to Residents

China is set to take its Digital Yuan pilot tests to Shanghai to pursue Central Bank Digital Currency (CBDC).

According to the Information Office of Shanghai Municipality, the latest proposed trial test will see the region give out as much as 19.25 million yuan (about 3 million U.S. dollars) in digital currency to consumers in the city through a lottery system.

China is one of the major economies that has advanced in its developmental strides per its government-backed digital Yuan pursuits. Ranking as one of the pioneers of the CBDC innovation, China has entered into the retail testing of its Digital Yuan. Residents get to use the new form of legal tender for small-scaled retail payments in its major cities, including Shenzhen. The same program is on track for the residents of Shanghai.

According to the announcement made on the official WeChat account, a total of 350,000 digital red envelopes, each containing 55 yuan of digital currency, will be given to lottery winners. This cash is non-refundable, and the program is in collaboration with the Industrial and Commercial Bank of China Shanghai Branch and the cloud service of the Bank of Communications Shanghai Branch.

While the early testing through the lottery system was not without hitches, China has primarily advanced integrating the Digital Yuan into people’s lives. The People’s Bank of China (PBoC) has not announced the date it will officially launch the Digital Yuan.

However, there are plans to make the new form of money available at the Beijing Olympics scheduled to hold in 2022. At the historical games, the Digital Yuan will be made available to foreign athletes and visitors, marking the first time the CBDC will be open to non-Chinese residents.

The Asian giant has been stiffening its crypto regulations lately, as analysts believe this new crop of regulations was launched to help pave the way for the soon-to-be-launched Digital Yuan.

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China Pays $ 6.2 Million in Beijing Lottery for CBDC Trial

Beijing will give out 200,000 red envelopes worth 200 yuan to lucky applicants in a lottery to be launched in June. Fintech expert Su Xiaorui said that the giveaway is a trial to ensure the pilot work for digital renminbi has been done in an organized and market-oriented manner.

Registration Details

According to the Beijing Local Financial Supervision and Administration, applications will be accepted from June 5 via the Bank of China apps or Industrial and Commercial Bank of China.

The registration deadline is midnight, June 7. Individual consumers have been invited to apply by searching keywords: Jingcai or digital renminbi in Chinese as long as they are located in Beijing.

Selected merchants can spend the 200 yuan digital renminbi in the red envelope at nearly 2,000 designated commercial entities in core commercial districts in Beijing from June 11 to 20.

Trials in the Form of Lotteries

The world’s second-largest economy is leading globally to launch central bank digital currencies (CBDC). The country has held trials in several major cities, including Shenzhen and Shanghai. A test in Shenzhen in January gave away 20 million yuan.

Later in February, the southwestern Chinese city of Chengdu dispatched about 40 million yuan of digital currency. Last year, other cities like the Chinese technology hub of Shenzhen held their lotteries.

China is yet to unleash the digital yuan nationwide. The currency has been in development since 2014, focusing on trials in the form of lotteries around the country.

The People’s Bank of China (PBOC) targets to be the first significant central bank to issue a CBDC. This is part of its internationalizing of the yuan and lower dependence on the dollar-dominated global banking system.

Digital Yuan Formed for Domestic use

Li Bo, deputy governor of the People’s Bank of China (PBOC), said in April that the central bank would advance its pilot projects’ scope and even allow foreign visitors at the 2022 Beijing Winter Olympics to use it.

PBOC Deputy Governor Lee insisted in April that the digital yuan was created for domestic use, not to challenge the US dollar’s dominance.

Lee said that they have repeatedly said that it is a natural process for the renminbi’s internationalization. He added that their goal is not to replace the US dollar and other international currencies but to allow markets to choose and promote international trade and investment.

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$6.2 Million Worth of Digital Yuan is Officially Piloted in Beijing

The Chinese digital renminbi is officially piloted in the capital of China-Beijing. The Chinese government plans to issue a total of $6.2 million worth of digital currency to Beijing residents through a lottery, totalling 40 million RMB.

According to the Beijing Local Financial Supervision and Administration Bureau, residents of the Chinese capital can apply for a lottery through two bank applications to share a total of 200,000 red packets. Each resident is limited to one red pocket containing 200 yuan worth of renminbi ($31) as part of the lottery.

In 2014, China was committed to developing the digital renminbi known as Digital Currency Electronic Payment (DCEP) in response to the increasing demand for coin digitisation.

China’s Ministry of Commerce said that its CBDC would be trialled in the wealthier cities in China first.

A lottery event was organised in Shenzhen as early as last year, distributing 40.2 million yuan digital currency in total in February this year.

China Prime Minister Li Keqiang early said that the digital renminbi would digitise the circulating banknotes. Li emphasised that the primary target market is in China and not attempt to challenge the dominance of the U.S. dollar. He stated that:

 “For the internationalization of Renminbi, we have said many times that it’s a natural process and our goal is not to replace US dollar or any other international currency,I think our goal is to allow the market to choose and to facilitate international trade and investment.”

However, Ray Dalio, the Bridgewater Associates hedge fund firm founder, questioned that China’s digital yuan would be more competitive than the US digital dollar future.

Regarding digital yuan, the deputy governor of the People’s Bank of China (PBOC), Li Bo, said in April that the central bank would expand the scope of the pilot and even allow foreign tourists to use it for the 2022 Beijing Winter Olympics.

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China’s Digital Yuan Receives Lukewarm Response from Early Users

The People’s Bank of China (PBOC) is inching closer to becoming the first major central bank to launch a sovereign digital currency. The bank has rolled out several ambitious pilot programs in recent months in a bid to test how the digital currency, dubbed the digital Yuan, would work in real life.

Heading to the Digital Era

Last month, the PBOC launched the most extensive domestic trial to date in Shenzhen, a high-tech metropolis in the country. 

The pilot trial allowed eligible participants to download the government’s e-wallet app on their phones and connect it to their bank account. They could then convert as much as 10K Yuan ($1,548) into the digital version, also called e-CNY, at a one-for-one rate.

Yet, a recent Bloomberg report shows that the much-hyped e-CNY is so far receiving a lackluster reception from early users. Most individuals interviewed by Bloomberg said they don’t intend to shift from the digital payment systems currently offered by established companies such as Ant group.

Some respondents cited privacy concerns as a major turnoff while using the e-CNY. They feared that the digital currency, which is controlled entirely by the PBOC, would enable authorities to trace each transaction.

There are even concerns that the digital Yuan could give the government real-time data on users’ finances and enable authorities to crack down on political dissidents.

According to Chinese regulators, the goal of the digital Yuan is to help increase financial inclusion and combat money laundering. e-CNY is also seen as a way to fend off potential threats from decentralized cryptocurrencies like bitcoin, which were banned in the country in 2017.

China To Prioritize Domestic Use of Digital Yuan

The hesitancy from early users involved in e-CNY trials highlights the massive task the PBOC has to foster adoption domestically.

In a recent interview, PBOC governor Li Bo said that the digital Yuan is meant for domestic use, allaying fears that China intends to topple the US dollar as the world’s main reserve currency. 

“For the internationalization of the renminbi, we have said many times that it’s a natural process, and our goal is not to replace the U.S. dollar or other international currencies,” he reiterated:  

Despite Li’s assuring remarks, some critics suspect China has high hopes for international use of the e-CNY as it strives to reduce its reliance on the US-led global financial system. 

Although current efforts are geared toward domestic adoption, Chinese officials plan to trial the digital Yuan with international athletes and visitors at the Beijing Winter Olympics in 2022.

Ant Group Joins China’s Digital Currency Trials

In the past year, the PBOC has ramped up efforts to finalize trials for the digital Yuan. The central bank has so far distributed millions of dollars’ worth of the e-yuan via an app that is connected with six of China’s major state-owned banks.

The ongoing trials have also involved numerous brick-and-mortar stores that facilitate selected users to make purchases with e-CNY.

And now, Alibaba’s Ant Group has announced that it will become the first major privately run company to participate in trials and research around the e-Yuan.

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Chinese online retail giant adopts digital yuan for salary payments has been using China’s Digital Currency Electronic Payment, or DCEP, system to pay the salaries of some employees since January.

The e-commerce firm revealed the news on Sunday while announcing its participation in the one-year DCEP trial show at the fourth Digital China Summit in Fuzhou slated for April 25 and 26.

Commenting on its digital yuan adoption journey, the company stated that apart from paying staff salaries, JD has also utilized the DCEP in business-to-business payments to partner firms as well as cross-bank settlements.

As previously reported by Cointelegraph, JD Technology and Digital Currency Research Institute — the company’s fintech arm — has been a DCEP development partner with the People’s Bank of China since September 2020.

In December, the online retailer began accepting the digital yuan as a payment method on its website. According to a previous Cointelegraph report, received almost 20,000 DCEP-funded orders during the first week of adoption.

JD has also supported DCEP trials, contributing about $4.6 million to Suzhou’s second public lottery event back in February. Commenting on the company’s continued support for the digital yuan, Fei Peng, the DCEP head at JD Tech said, “JD Technology will continue to combine strengths in the supply chain, omnichannel scenarios, advanced technology, and client service experience to contribute more to the DC/EP ecosystem.”

Meanwhile, JD’s continued support for the digital yuan puts AliPay and WeChat Pay’s absence from several DECP trials into even more stark relief. From ride-hailing services like DiDi Chuxing to streaming platforms like Bilibili, several firms are involved in testing China’s CBDC except for the two largest payment gateways in the country.

Opinions over whether the DCEP will seek to challenge the AliPay–WeChat Pay duopoly in China’s electronic payment market remain mixed. Back in October 2020, Zhou Xiaochuan, a former PBoC governor, argued that the digital yuan was the central bank’s counter to the dollarization of the economy.