wordpress blog stats
Connect with us

Hi, what are you looking for?

China’s digital yuan moves into second phase of trials, successfully tests cross-border payment

Great wall of China

On Thursday, the People’s Bank of China (PBOC) began the second phase of its Central Bank-backed Digital Currency (CBDC) or digital yuan launch and also tested the potential of using the digital currency for cross-border payments with the Hong Kong Monetary Authority. This is according to the Wall Street Journal and  local news agency Sina Finance.

During the first phase of its trial last year, China handed out $1.5 million worth of digital yuan in select cities across regions like Shenzhen, Suzhou, Xiong’an, Chengdu, and in locations where the 2022 Winter Olympics are due to be held in Beijing. During the second phase, the city of Changsha in the Hunan province was added to the list of cities where the CBDC would be rolled-out. The second phase of trials began on April 7, after consumers applied to participate in the digital yuan issuance in late March this year.

In the previous phase of the launch, around 200 yuan ($31) was issued directly by the PBOC through digital wallets. Under the second phase, consumers can apply for participating in the trial through their bank.  Up till March 31, the Bank of Communications offered 50,000 giveaways of 20 yuan ($3) each, Bank of China provided 20,000 lots of 8.8 yuan ($1.35 yuan) and the Agricultural Bank of China announced giveaways worth 8.8 yuan ($1.35) each, according to Ledger Insights.

China’s CBDC follows a two-tier model. The first tier is where the PBC issues the digital yuan to participating payment companies and banks, while under the second tier, banks and payment players distribute the digital yuan to their customers. There are four wallets on offer by the central bank:

  1. Type 1: Limit per transaction at 50,000 yuan, daily limit at 100,000 yuan
  2. Type 2: Limit per transaction at 5,000 yuan, daily limit at 10,000 yuan
  3. Type 3: Limit per transaction at 2,000 yuan, daily limit at 2,000 yuan
  4. Type 4: Limit per transaction at 500 yuan, daily limit at 1,000 yuan

The Type 4 wallet provides anonymity, to use the digital yuan in any of the three other wallet types customers have to fulfill Know-Your-Customer norms. The higher the wallet limit, the higher the KYC requirement.

In a conversation with reporters, Wang Xin, Research Bureau Director at the PBOC said that more trials were going to be launched this year, ““increasing, and also expanding in scope,” according to CNBC. He  said that market interest is “very strong and everyone is paying close attention” to the digital yuan, especially since more central banks around the world are looking at developing their own CBDCs. Wang added the PBOC plans to start with digital RMB or Renminbi pilot.

Last month the Director of the PBOC’s Digital Currency Research Institute, Mu Changchun, said that as most monetary authorities around the world want to protect their fiat currencies and monetary sovereignty, the CBDCs or digital currencies of one central bank should not impede the ability of another central bank to carry out its mandate for monetary and financial stability. He said that central banks should “avoid dollarisation” of digital currencies.

Advertisement. Scroll to continue reading.

Speaking at an event organised by the BIS, Changchun said that cross-border payment arrangements using digital fiat currencies should comply with with the regulations and the laws of the jurisdictions concerned. He also said that information from fund flows should be synchronised so that regulators can monitor transactions for compliance. In February, China joined a global CBDC project for cross-border payments along wit the Hong Kong Monetary Authority, Bank of Thailand and the Central Bank of the United Arab Emirates.


MediaNama has prepared a guide on crypto-currency regulations in India, listing the government’s position over the last few years and various policy recommendations; read it here: A complete low-down on crypto-currency regulation in India.

Also Read

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

Views

News

By Rahul Rai and Shruti Aji Murali A little less than a year since their release, the Consumer Protection (E-commerce) Rules, 2020 is being amended....

News

By Anand Venkatanarayanan                         There has been enough commentary about the Indian IT...

News

By Rahul Rai and Shruti Aji Murali The Indian antitrust regulator, the Competition Commission of India (CCI) has a little more than a decade...

News

By Stella Joseph, Prakhil Mishra, and Surabhi Prabhudesai The recent difference of opinions between the Government and Twitter brings to fore the increasing scrutiny...

News

This article is being posted here courtesy of The Wire, where it was originally published on June 17.  By Saksham Singh The St Petersburg paradox,...

You May Also Like

News

Speaking at a webinar, the RBI deputy governor examined key issues related to bank-backed digital currencies and spoke about why they were important given...

MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ

Subscribe to our daily newsletter
Name:*
Your email address:*
*
Please enter all required fields Click to hide
Correct invalid entries Click to hide

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ