China’s national digital currency or ‘CBDC’ or as they call it, “DC/EP” has been in development for 5 years now. And there has been plenty of speculation since the last quarter of 2019, that it will be released anytime soon.
The Chinese President’s call for accelerated adoption of blockchain technology was seen as a big hint that the national digital yuan is ready to launch. However, Chinese officials and the People’s Bank of China have denied these claims.
However, the latest buzz suggests that DCEP is finally past its development stage and is being distributed among the state officials for testing purposes.
According to a report, published in ChinSci-Tech (a board of enterprise and public companies) on April 16, the new CBDC is being tested as a Transport subsidy scheme for local government officials as well as enterprise workers.
Another official report also confirmed that AliPay, a popular mobile payment subsidiary of Alibaba along with Ant Financial, was responsible for the development of digital yuan’s hardware infrastructure including distribution and payment gateway technology.
The Payment Trials Have Begun
According to reports available in local media, the Xiangcheng District of Suzhou would see local enterprises and government officials paying 50% of their worker’s transport subsidies in the digital yuan.
All the enterprises in the Suzhou district have been requested to sign a digital currency distribution agreement with a relevant bank and subsequently install a compatible digital wallet for the workers.
A total of 4 banks have been assigned across the province to make sure the testing phase begins smoothly. The four banks include Commercial Bank of China, the Agricultural Bank of China, the Bank of China and the China Construction Bank.
These reports also revealed that the enterprise must connect with one of the four banks to offer transport subsidies to their workers. The issuance agreement must be signed before the end of May.
The Finer Details of the DCEP
While there is no official statement or update from the government, however. The published letter in the ChinSci-Tec revealed finer details: including 5 patents by the Alipay group.
Examining these patents revealed that the new DCEP would work on a two-layer architecture and delivery system which would allow licensed third-party players to distribute the national CBDC.
By now it’s clear that Alipay would play a major role in the issuance and distribution of these digital currencies along with authorized banks.
A majority of the Chinese population won’t see a difference while using the CBDC, as the majority of the population is already using digital payments. The only difference would be the back-end and working of these CBDC as they are believed to function on top of the blockchain-based network.
It is also important to note that the network used by the government won’t be completely decentralized and has been mentioned by the senior officials of the People’s Bank of China.
Given the governance model of the Chinese government, speculations were high that the use of blockchain was just a facade and the whole idea behind a national CBDC was to have stricter monitoring of the flow of currency in the country.