WHY THIS MATTERS IN BRIEF
The debate about cash being dead rages on, but as far as China concerned digital cash is the future.
Covid-19 has done many things this year and getting more people to switch from cash, where the virus can linger for days, to digital payments has been one of them.
But even before the pandemic though cash in some countries, like Sweden, was on its last legs as more and more people made the switch, so a couple of years ago it didn’t come as any surprise that China’s People’s Bank of China (PBOC) was experimenting with creating a digital version of its own sovereign currency.
While the first trials got underway a while back this week the Chinese government announced they’ve started one of the biggest real-world trials for their new digital currency as the government continues to edge closer toward creating a cashless future.
Last week, the government in Shenzhen carried out a lottery to give away a total of 10 million yuan, about $1.5 million, worth of the digital currency. Nearly 2 million people applied and 50,000 people actually won.
The winners can now download a digital renminbi app to receive the digital yuan and spend it at over 3,000 merchants in a particular district of Shenzhen. The south China technology hub is home to some of the country’s biggest tech giants including Huawei and Tencent.
Local supermarkets and pharmacies are among the participating merchants as well as Walmart, according to a post by the Shenzhen government messaging app WeChat.
China has been pushing toward a cashless society.
The digital yuan is not a cryptocurrency like bitcoin. Instead, it is issued and controlled by the People’s Bank of China, the country’s central bank. It is not looking to replace digital wallets like Alipay or WeChat Pay. It will likely work together with them and other banks.
In comparison, Bitcoin is decentralized, which means it’s not owned and controlled by one entity, and it is not distributed by a central bank.
China’s digital yuan has been in the works for the past few years and there have been just a handful of small trials across the country, but the Shenzhen pilot appears to be the biggest so far.
Central banks around the world are exploring the idea of issuing digital currencies, and just last week the Bank for International Settlements and several other central banks published a framework for central bank digital currencies, or CBDCs which they all hope to roll out soon – but for now, as seems to be the way in many areas, China is pulling ahead of its want to be competitors.