The Chinese central bank digital currency (CBDC) could be approaching its long-anticipated launch as new reports indicated that multiple local commercial banks have begun conducting trials of a digital wallet application linked to the CBDC.
In the latest turn of events regarding China’s future digital currency, a Reuters report asserted that several large state-run commercial banks are conducting internal testing of the digital wallet app. Employees of those banks have started transferring money and making payments, including paying bills.
By implementing these trials, the commercial banks have doubled-down on a recent statement from the People’s Bank of China (PBoC). It urged for quicker development and enhanced promotion on the necessity of a digital currency.
Shortly after the PBoC made that comment, a former Chinese banker shared a similar opinion. Wang Yongli, former vice president of Bank of China, said China might start positioning the CBDC as a substitute for M0 (cash in circulation). However, the director of the Haixia blockchain research institute also noted that it shouldn’t be confined to such substitutions as it may raise risks for its market competitiveness.
In contrast, managing director of the Shanghai-based Digital Renaissance Foundation Cao Yin highlighted some risks in case of a rapid M0 replacement:
“The nation still needs cash reserves, and there are user scenarios in which the use of cash still takes hold, particularly among the older population.”
The world’s most populated nation is arguably the most advanced country in terms of CBDC development. A previously leaked screenshot suggested that one of the largest state-owned banks – the Agricultural Bank of China – had created a test version of a mobile app linked to the digital currency.
With different purposes than the wallet app from above, it operated similarly to other online payment platforms such as Alipay and WeChat Pay.
Later on, another report noted that the Chinese government might employ the upcoming CBDC for post-COVID-19 stimulus and counter the potential US threats to local financial institutions and the yuan’s international settlement. The country even tapped Tencent-backed food delivery company to test the digital currency and to encourage mass adoption in the sector after the launch.
