Several banks in Shanghai have started offering digital yuan wallets to interested individuals and corporates. So far, the electronic currency has only been available during limited trial periods and to people that have been selected in a lottery.
The Industrial and Commercial Bank of China, China Construction Bank, and Bank of Communications confirmed to KrASIA on Thursday that private persons and companies can apply. The Bank of China, Agricultural Bank of China, as well as the Postal Savings Bank of China opened the service to individuals, according to a report by The Paper.
The signup procedures differ from bank to bank. At the Bank of Communications in Shanghai, individuals will need to identify themselves with name, phone number, and mobile operating system, an employee of the branch told KrASIA on the phone. The bank will perform KYC checks with the People’s Bank of China, which normally takes one or two weeks.
“One can just scan a QR code at our bank to apply for a digital yuan wallet,” an Industrial and Commercial Bank of China employee surnamed Gu explained. Apart from a name, phone number, and the operating system, the applicant also has to provide an ID number. The QR-code is location-based, so those living outside Shanghai are still denied access.
Corporates that want to open a digital wallet at the Bank of Communications need to have a corporate bank account there first, while the Industrial and Commercial Bank does not have such a requirement and asks only for the identity of a company and business license.
“Technically speaking, there is no need to have a bank account at all to open a digital yuan wallet, as DCEP (Digital Currency Electronic Payment) is decoupled and independent from bank accounts,” Li Lianxuan, chief analyst of blockchain company OK Group, told KrASIA. Banks may have other concerns such as risk control and therefore require an account, he said.
“This will make it easier for individuals to test the digital yuan,” said a Beijing resident surnamed Chen, who won RMB 200 (USD 30.65) in digital currency in one of the lotteries, to spend it on JD.com, as well as selected bricks-and-mortar retailers. Local governments in Beijing, Shenzhen, and Suzhou, last year organized trials and a few lucky winners could experience the new currency first hand.
Funds are safe
“Now it seems more like a way for banks to attract new clients and their money,” Chen added. Xie from the Bank of Communications disagrees, saying that it’s in line with the central bank’s call to conduct further trials. “The bank is paying no interest as it cannot lend the money to others,” she explained, noting a departure from the current fractional reserve system and security features, as the bank can’t touch its customers’ funds stored in the digital yuan wallet.
Using the digital yuan is very similar to using Alipay to pay, said OK Group’s Li. The digital money also protects the user’s privacy to some extent if the transaction is small. “Like cash, it is not linked to a phone number, name, and identity, although the banks demand such information during the trial,” he explained. For large transactions, however, this information could be requested to avoid money laundering.
As another benefit, cross-border transactions will be much easier and less costly, but trials in this area have not started yet, Li said. Once widespread, the digital yuan allows central banks to more easily monitor capital flows and fine-tune their policies, which is beneficial for the entire economy.
Li explained that we are still in an extended trial period of the digital currency, while he expects broader promotion after the Beijing Winter Olympics next year.
“A large-scale use could be possible within three to four years, which is about how long it took Alipay and WeChat Pay needed to gain popularity,” he said. “No merchant will be allowed to turn down the digital yuan, but they could refuse Alipay or WeChat Pay. It’s up to the policymakers.”
However, a person with knowledge of the matter told KrASIA that there is no timetable for the full implementation of the digital yuan and that it’s up to authorities who would like to launch the money in a “stable” way.