China’s big four state-owned commercial banks have started large-scale internal testing of what would be the world’s first sovereign digital currency, as the launch of the digital yuan appeared to move a step closer, the 21st Century Business Herald reported on Thursday.
The Bank of China, the China Construction Bank, the Industrial and Commercial Bank of China, and the Agricultural Bank of China are working on the digital yuan with the central bank in major cities, including Shenzhen, according to the Guangzhou-based newspaper.
Users taking part in the trial can use the app to top up their accounts, withdraw money, make payments and transfer money after registering with their mobile phone number. The banks are also testing a scenario where a user can make a transfer to another account without an internet connection, the newspaper added.
Employees at some of China’s big state-run banks have also already started to use the sovereign digital currency to make transfers and pay bills, the 21st Century Business Herald reported.
An official timetable for launching the digital yuan has yet to be announced, although on Monday, the People’s Bank of China (PBOC) said it would “actively and steadily promote the research and development of the state digital currency” in the second half of the year—another sign that it is accelerating the progress of the digital currency.
Chinese ride-hailing giant Didi Chuxing also said last month that it has entered into a “strategic partnership” with the central bank over the digital currency plan, officially known as the Digital Currency Electronic Payment service.
The PBOC has reiterated that the sovereign digital currency will be a replacement for M0, the amount of cash in circulation in the form of notes and coins, but former Bank of China vice president Wang Yongli said last week that it would eventually replace all currencies, not just M0.
China’s sovereign digital currency is increasingly tilting toward digitalization of existing cash, which is controlled by the central bank, and reaches people through the existing banking system.
Instead of offering an alternative to the yuan, Beijing’s digital currency would also be more of a competitor to existing payment services including Alipay and WeChat Pay, which have so far dominated mobile payments in China.
China’s digital currency plan, which is different from the Libra program backed by Facebook, is also not intended to ease Beijing’s draconian capital account controls.
The Group of 7 (G7) countries are reported to be promoting cooperation on central bank digital currencies at the annual G7 summit, which has been postponed until September at the earliest.
The topic was proposed by the Japanese government and supported by the United States, according to Japanese news agency, Kyodo.
The report said the move was in a direct response to China’s central bank digital currency research and its digital yuan due to its potential challenge to the US dollar’s dominance.
The Digital Currency Research Institute of the People’s Bank of China, the agency in charge of digital currency development and testing, said in April that pilot schemes for the digital currency would be held in four cities—Shenzhen, Suzhou, Xiongan and Chengdu. It also said that the venues for the 2022 Winter Olympics could also be used to test the currency.
This article was originally published in the South China Morning Post.