April 22, 2020
The People’s Bank of China (PBOC), the country’s central bank, introduced a digital currency known as DCEP (Digital Currency Electronic Payment), which it said will share some features of bitcoin and Facebook’s Libra. It’s being internally tested in four large cities — Shenzhen, Suzhou, Chengdu and Beijing satellite city Xiong’an — aimed at improving its functionality and, in part, to prepare for the 2022 Winter Olympics in Beijing. The PBOC started its digital currency research in 2014.
The Wall Street Journal reports that, although DCEP “won’t boast the anonymity that bitcoin and other cryptocurrencies tout, China’s central bankers have vowed to protect users’ privacy.” China’s central bank governor Yi Gang stated that the digital currency “won’t replace other parts of the country’s money supply, such as bank deposits and balances held by privately-run payment platforms,” but is intended to “replace some of China’s monetary base, or cash in circulation.”
A government source reported that, next month, in Suzhou district Xiangcheng, civil servants will start receiving “half of their transport subsidy” in the digital currency. Those workers were already told “to begin installing an app on their smartphones this month into which the digital currency would be transferred” and that the currency “could be transferred into their existing bank accounts or used directly for transactions at some designated merchants.”
WSJ reports that, “China is ahead of many other countries in preparing the launch of an official digital currency … [as] in recent years, the use of traditional paper bills and cash has declined sharply, and smartphone payments have become so ubiquitous.” Younger urban dwellers already “no longer carry their wallets or cash for shopping,” but use Tencent Holdings’ WeChat Pay and Alipay, “operated by Ant Financial Services Group, an affiliate of Alibaba Group Holding.”
PBOC has stated that the shift to “a government-run digital payment system will help combat money laundering, gambling and terror financing … [and is] a way to improve the efficiency of transactions in its financial system.”
PBOC’s development of the digital currency was aided by the country’s four biggest state-run banks, including Agricultural Bank of China, which made the digital wallet app. Screenshots of the app “purported to show a variety of functions, including allowing savers to track transactions of the new currency, manage their accounts and link the wallet to their existing bank accounts.”