In brief

  • The People's Bank of China has settled over three million payments in digital yuan, according to deputy governor Fan Yi Fei.
  • During this pilot, the bank examined more than 6,700 use cases for its central bank digital currency.
  • Around 5,000 payments in digital yuan were also granted to medical workers fighting the coronavirus.

The People’s Bank of China (PBoC) has processed over three million transactions—worth 1.1 billion yuan ($162 million) as part of its trial of the DCEP (Digital Currency, Electronic Payment), its pilot for a central bank digital currency (CBDC).

Speaking at virtual conference Sibos 2020 on Monday, the PBoC’s deputy governor Fan Yi Fei noted that, “An aggregate of 113,300 personal digital wallets and 8,859 corporate digital wallets have been opened […] up until late August.”

DCEP “red envelopes” for key workers

According to FinTech Futures’ report, the deputy governor confirmed that “internal closed pilots” have been launched in Shenzhen, Suzhou and Xiong’an. The PBoC also plans to test its digital yuan during the upcoming Winter Olympics in Beijing.

The bank has reportedly researched over 6,700 use cases for a CBDC, including areas such as bill payments, catering services, transportation, shopping and government services.

Additionally, around 5,000 medical workers in Shenzhen’s Luohu district have received “red envelopes” containing digital yuan for their contributions to fighting the coronavirus pandemic. These funds can be spent at specified merchants in the district.

The global implications of China’s DCEP

Yi Fei also reportedly noted that the “evolution of currencies” is the key element that would allow banks to improve cross-border payments. “We could achieve interoperability and address the trilemma—low costs, low risks, high efficiencies—by using digital fiat currency,” Yi Fei explained, adding that, “To protect fiat currency from these cryptoassets and safeguard monetary sovereignty, it is necessary for the central banks to digitize banknotes through new technologies.”

The PBoC regards the DCEP as an important financial infrastructure for the future, Yi Fei explained, adding that “In recent years, with the development of distributed ledger technology and cryptoassets such as Bitcoin, stablecoins have emerged and triggered a new wave of competition attempting to reap profit from substituting the fiat currency in circulation.”

As Decrypt reported, China is likely to reduce its holdings of US Treasury bonds to just under $800 billion—from the current level of more than $1 trillion—ahead of the digital yuan’s launch.

The emergence of a Chinese CBDC could have global implications. US lawmakers have already met to discuss the need for a digital dollar in light of China’s DCEP, while the country’s Office of the Director of National Intelligence has sought out researchers to explore the effects of the US dollar losing global dominance.