People’s Bank of China kicks off digital currency trials

A spokesperson for China's central bank confirmed to ZDNet on Wednesday that internal trials for digital currency are now underway in Shenzhen, Suzhou, Chengdu, and Xiong'an.

The spokesperson did not provide further details on the trials to ZDNet when asked, but the Wall Street Journal reported that civil servants in the Suzhou's Xiangcheng district would receive half of their transport subsidy in the form of digital currency via a smartphone app next month.

Screenshots of a digital currency wallet app made by state-owned Agricultural Bank of China (ABC) have also been circulating widely online. In the screenshots, the app appeared to allow the sending and receiving of payments, as well as the transferring of funds. 

The ABC did not respond to requests for more information.

The PBOC has had a digital currency research institute dedicated to the development of digital currency since 2014. In September, PBOC governor Yi Gang said the goal of creating a digital currency was to package it with electronic payment instruments and replace a part of cash, but he did not reveal a timetable for its rollout.

Mu Changchun, head of the digital currency research institute, reportedly claimed in the same month that the digital currency had the best "legitimacy and security."

Matthew Graham, CEO of Sino Global Capital, a private equity in Beijing, told ZDNet that no other country has made as much progress as China in trialling digital currencies. He said China has put substantial research and development efforts and placed the project high on its priority list.

"It is difficult to speculate on exact timing," Graham said.

"But in our view, this is a strong indication the project is on course and proceeding step by step."

Hong Kong Bitcoin Association president Leonhard Weese told ZDNet he believes the digital currency is an attempt at making a fast and cheap settlement system for the financial services industry, similar to Hong Kong's Faster Payment System and something that is more user friendly than Europe's Single Euro Payments Area, but he noted it would be different because funds are held directly within the central bank.

"It may mean the end of traditional banks in China," he said.

He added that most people would probably continue to use WeChat and Alipay's mobile payment solutions, which act as wallets for the People's Bank of China accounts. 

"The main difference that people will feel is that it will be much easier to move funds between WeChat and Alipay and all the insurance, lending, trading, and investment apps that exist. It breaks the economies of scale of a payment app."  

Related Coverage

• Huawei revenue slightly improves for first quarter of 2020
• Alibaba to invest $28B in cloud over three years
• TSMC cuts growth outlook for 2020
• DOJ urges FCC to revoke China Telecom's license
• COVID-19 outbreak spells chance for India to become manufacturing alternative to China
• DarkHotel hackers use VPN zero-day to breach Chinese government agencies