China flirts with digital currency in four urban centres amid Covid

NEW DELHI: China in a significant move has launched a trial of digital yuan in four urban centres of the country for specific services even as the world grapples with containment of Covid.

The major cities of Shenzhen, Suzhou and Chengdu, as well as the Xiong’an New Area, will witness use of digital currency for some services, according to state-run Xinhau News Agency.

The three cities have a overall population of more than 38 million people. The Xiong’an New Area is a district and economic zone being developed near Beijing. There is no reaction yet from the international community.

According to local news reports the currency will be used to subsidise transport in Suzhou, while in Xiong’an the trial primarily focuses on food and retail.

According state-run China Daily, a statement by the People’s Bank of China (PBOC) said that the digital currency – known as the e-RMB – “will not be issued in large amounts” for public use in the short term, and that the digital currency in circulation would “not lead to an inflation surge”.

The PBOC, the country’s central bank, will be the sole issuer of the digital yuan, initially offering the digital money to commercial banks and other operators. An official told the China Daily that the public would be able to convert money in their bank accounts to the digital version and make deposits via electronic wallets.

China’s Digital Currency Electronic Payment project began in 2014. “…The central bank digital currency will be the electronic form of the renminbi, with value equivalent to the paper notes and coins in circulation, according to a document released by the PBOC Currency Research Institute. Drawing on the experience of core blockchain technology, the digital currency could change the financial system in big ways — by cutting costs and making transactions easier, more convenient and more transparent.

Unlike decentralized cryptocurrencies, such as bitcoin, that allow users to transfer value with no central authority or third party involved, the government-backed digital currency is put under the centralized mechanism of the central bank and thus is as stable in value as its cash cousin,” the China Daily wrote in its editorial.

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