China's digital currency program will expand to its capital, Beijing, and other major cities such as Tianjin, Hebei, Guangdong, the Yangtze River Delta, and Hong Kong-Macao Greater Bay Area.
According to a ad official conducted by the Ministry of Commerce of China, RMB digital pilot programs will be led by the Central Bank of China, the People's Bank of China (PBOC). The programs will run in the aggregated regions as well as the previous pilot regions “where conditions permit”, as stated in the announcement.
The ministry further stated that they hope to finish the Yuan Digital design for late 2020, but did not specify the start dates of the programs.
Extensive testing is underway
The new development follows some previous critical announcements about China's plan for its digital currency. In April, the People's Bank of China declared that the digital Yuan could be ready for use during the 2022 Winter Olympics (u1) event to be hosted by Beijing.
At the time, it was also alleged that four major banks were conducting extensive testing on the digital currency in Shenzhen, the Xiong'an New Area, Suzhou and Chengdu, with speculation that the launch date would be mid-2021.
Various tests have been reported for the digital Yuan in 2020. The Bank of China and the Agricultural Bank of China unofficially launched a mobile payments app in April to test the viability of the digital currency. Although not available to the public, the test app's features included an active wallet, wallet interoperability, and transaction tracking.
Still, in April, another report said that Suzhou municipal authorities planned to pay half of their employees' May transportation allowances in Yuan Digital.
China's Digital Yuan is a hybrid
According to China Daily, the PBOC's digital currency electronic payment (DCEP) will be a combination of centralized and decentralized technology, based on both blockchain and traditional financial structures. The PBOC's Digital Currency Research Institute stated that its value will be equivalent to fiat banknotes and coins in circulation.
"It is a controllable and anonymous payment instrument system of the digital renminbi."
This reduces the digital currency to the electronic payment system of a central bank, which represents a tactical move against the US dollar. Unlike other major electronic payment systems in China such as WeChat Pay and Alibaba, the advantage of DCEP will be its ability to support transactions even without an internet connection through a unique peer-to-peer feature called “tap and tap”.
With many central banks around the world showing increasing interest in developing a digital currency, China is by far the closest to issuing a CBDC.