More and more vendors have signed on to the eCNY in recent months as it scales up for a full-scale launch.
The currency will further not have any service fees associated with its usage. These diverse methods of utilization aim to make the digital yuan more accessible, with the elderly or impoverished less likely to retain smartphones. Other types of hardware methods have been piloted as well, including contactless cards and even wearable devices that can perform payment operations all without a wireless network. Telecom giant Huawei began rolling out the feature on its mobile devices in late 2020.
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This is known as hardware wallet technology, as it does not require a software application in order to clear the transaction. One potential advantage over the existing mobile payment platforms is that the eCNY will not require an internet connection on either side of the transaction, as physically touching the phones together will also be a mechanism for transfer.
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However, for larger volumes, stricter identity checks and links to an onshore bank account will need to be demonstrated.Įnjoying this article? Click here to subscribe for full access. Last month, the central bank reported that users will be able to register for a wallet allowing for daily expenses of up to 5,000 RMB ($770) using only a mobile phone number. Like those payment platforms, the digital yuan will operate through a consumer digital wallet that allows funds to be stored and then transferred for expenditures. In fact, a former PBoC director stated the initial impetus for the development of the digital yuan project was in part to counter the ubiquity and strong market share of those mobile payment giants. The usage infrastructure for the eCNY is not sharply different from what Chinese consumers are already accustomed to with Alipay and WeChat Pay. Get briefed on the story of the week, and developing stories to watch across the Asia-Pacific. These low-cost, high-frequency transactions are an ideal avenue for testing the robustness and practicality of the PBoC-backed digital yuan before propagating it on a grander scale. Other cities, including Beijing and Suzhou, have implemented pilot programs allowing subway fares to be paid via eCNY. Consumers would have the flexibility to incorporate the eCNY into their accounts on commercial bank apps rather than necessarily having to familiarize themselves with a new system.Ĭhengdu became the first city nationwide to accept the digital yuan as payment across its entire vast public transportation system. This portends a more free-flowing adoption process, with the central bank not needed to hijack the entire payment apparatus in order to foster acceptance of the digital currency. In such a structure, the PBoC works together with commercial banks in order to foster acceptance of the digital yuan using their existing infrastructure and mobile applications. The eCNY largely operates via what is known as a two-tiered system. Popularization efforts have mostly focused on the five major global cities of Shenzhen, Suzhou, Beijing, Chengdu, and Shanghai. To this date, more than $40 million has been distributed in eCNY. They are then able to use the currency for purchases at any vendor that accepts it. Typically, these “winners” receive a set amount of digital yuan in the form of a virtual “red packet,” the traditional Chinese way of gifting money. The revolutionary new currency has thus far made its debut through lottery systems, which allocate funds to users who are randomly selected. The People’s Bank of China (PBoC), the de facto Chinese equivalent to the Federal Reserve, backs the currency, which can then replace cash in circulation. China’s digital yuan, or eCNY, is a trailblazer in the realm of central bank digital currency, getting off the ground at a much quicker speed than counterparts pursued in the West and Japan.
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