The digital yuan might have an official use in the 2022 Winter Games. The tests focus on assessing the operational resilience of the digital currency.
China’s government will test its central bank digital currency (CBDC), the digital yuan, in a larger number of regions in the country.
The Ministry of Commerce of the Asian country announced on August 14th the extension of the use of the digital yuan to 3 new regions. These add to those where the pilot plan is already under implementation.
The agency said that, together with the Central Bank of China (PBOC), they consider that the digital yuan meets the technical conditions to undergo tests in more places.
The areas where tests will soon take place are Beijing-Tianjin-Hebei, Yangtze River Delta, and the Guangdong-Hong Kong-Macao Greater Bay Area, in the east of the country. In these regions, the most prominent feature is the inclusion of cities with great commercial and financial activities, such as Beijing and Hong Kong.
These 3 areas will add to the 4 places where the CBDC has undergone tests since last April: Shenzhen, Chengdu (Sichuan province), Suzhou (in the center and southeast of the country), and the city of Xiong’an (in the northeast).
The tests are also taking place on some of the sites of the 2022 Winter Olympics. There is no official schedule for the launch of the digital currency, but it seems that the idea is to have it ready for this event.
Digital Yuan is Tested in Retail Payments
In the pilot areas, people are using the digital currency for various small-scale payments. These include the retail sale of food and groceries in stores, restaurants, and supermarkets, together with the recharging of public transportation cards.
According to Yang Dong, Director of the Blockchain and Financial Technology Research Center at Renmin University Institute of Law and Technology, “the design of most applications is aimed at end consumers.” He says that “it will take time to apply the model in wholesale trade.”
“We are conducting various stress tests,” said the supervisor of a bank’s technical department in Suzhou. He added that the pilot plan focuses on testing payments with digital currencies and measuring the stability of the system.
In this way, they assess the behavior of the system in the face of an increase in the volume of transactions and they work on the design of technical solutions to ensure operational resilience. They are also testing offline transfer functions using near-field communication (NFC) technologies so that people can make offline transactions.
The banks participating in the tests regularly report on the technical achievements and emerging operational problems. The official said that “the goal is to use the digital currency in other areas, such as health care, education, e-commerce, tourism, and cultural consumption”.
Concerning the progress of this pilot, user María Shen, an expert cryptography engineer, posted on Twittera video showing one of these test transactions last August 19th.
The CBDC is a state alternative to the retail payment solutions that have proliferated in China, under the lead of Alipay and WeChatPay. Additionally, they expect to promote the use of the national fiat currency (renminbi or yuan) for cross-border payments to eliminate the dependence on the US dollar.
By Alexander Salazar
