'Red packet' e-currency test planned in capital

2021-02-08 12:03:16

China's official app for digital yuan is seen on a mobile phone next to 100-yuan banknotes in this illustration picture taken on Oct 16, 2020. [Photo/Agencies] Residents to receive 200 yuan worth of e-CNY to spend during Spring Festival A lucky group of people in Beijing will receive a packet of 200 yuan ($31) apiece in digital currency from the municipal government on Wednesday for online and offline use during the upcoming Chinese Lunar New Year, a notice said on Saturday evening. The initiative is part of the trial of the central bank's digital currency, the e-CNY. Beijing will be the third city-after Shenzhen, Guangdong province, and Suzhou, Jiangsu province-to send the digital yuan to consumers for testing. This time, the e-CNY issuance in Beijing is worth 10 million yuan, which will expand the trial on the whole to more than 100 million yuan. People who receive the "red packet" after a random draw can use the e-CNY through certain apps or the digital wallets of designated stores and restaurants in Wangfujing, one of the famous business walking streets in China. They can also use e-CNY online, via the app of the e-commerce platform JD, according to a notice from Beijing Local Financial Supervision and Administration. The e-CNY in the Beijing trial can be used from Feb 10 to 17. Six banks are participating in the test-Industrial and Commercial Bank of China, Bank of China, Agricultural Bank of China, China Construction Bank, Bank of Communications and Postal Savings Bank of China. China started large-scale, central bank digital currency pilot programs in 2019. Beijing also plans to expand e-CNY usage to the upcoming Winter Olympics in 2022. The 10 million yuan in red packets is one of the regular tests before the official launch, according to the local notice. According to experts close to the People's Bank of China's digital currency institute, nine institutions-including State-owned big banks and e-commerce giants-have been designated by monetary authorities to develop digital wallets and related technology. To some extent, they are competitors in the digital currency payment service. To win the competition, the digital wallet providers should connect the service with some specific spending scenarios, such as payment in bookstores or hotels. Through this, the winner would rely on a mature payment ecosystem. One of the potential issues is that having different digital wallet operators could lead to data fragmentation or isolation of information, and the central bank may need to consider ways of controlling the trans-action costs, said Huang Yiping, deputy dean of the National School of Development at Peking University and chairman of China Finance 40 Forum's Academic Committee. The e-CNY's debut will intensify competition among payment service providers and probably change the market structure in the sector, said Huang, who expected the digitalized renminbi to soon become Chinese people's digital wallets, "hopefully this year". Globally, the COVID-19 pandemic may have further accelerated the pace of the digital revolution in many areas, and the digitalization process has also reached the financial system and even the design of money in many countries. In a survey by the Bank for International Settlements, 86 percent of 65 respondent central banks are doing some kind of research or experimentation of digital currencies. In a recent speech, Agustin Carstens, general manager of the Bank for International Settlements, said: "If digital money is to exist, the central bank must play a pivotal role, guaranteeing the stability of value, ensuring the elasticity of the aggregate supply of such money, and overseeing the overall security of the system. Depending on their design,... (such systems) could upend our existing financial system. Different jurisdictions may pursue different avenues. This relates in part to different preferences regarding data privacy across different societies."