$1.5 million of China's CBDC Will be Distributed in Shenzhen

Chinese tech hub Shenzhen said Thursday it would distribute over 10 million yuan ($1.5 million) to citizens as part of a broader pilot test for its national digital currency, reported local news outlet CGTN.

The move would help stimulate public consumption and test demand for the Chinese digital currency, officially called the Digital Currency Electronic Payment (DCEP).

Funding the test is Shenzhen's Luohu District, which will distribute the DCEP to 50,000 recipients through a “lottery” system, the report said. They can then use the digital currency at a reported 3,389 merchants, such as restaurants, supermarkets, gas stations, metro stations, department stores, and other everyday businesses.

Recipients can avail the lottery on wallets developed by local banks, including the People’s Bank of China, the country’s central bank. “Just need to download a DCEP wallet, there are four wallets developed by the major 4 commercial banks,” noted Mo Li, head of marketing for crypto wallet app HashKey Hub.

Similar pilot runs of the DCEP have already been conducted in the Guangdong-Hong Kong-Macao Greater Bay Area, of which Shenzhen is a part. 

Meanwhile, Chinese businesses like local ridesharing giant DiDi commenced DCEP tests for taxi payments in July, but the upcoming wide-scale distribution to Shenzhen residents is among the first such instances.

The tests are part of China’s broader plans to incorporate digital currencies within its economic framework, as it looks to reduce its reliance on the US dollar. Reports suggest the country plans to fully launch the DCEP before the start of the 2022 Winter Olympics in Beijing, figuring out all the nitty-gritty before that time. And it's seemingly on track thus far.