Digital yuan may be available at the 2022 Winter Olympics
Shenzhen, Suzhou, Xiongan, Chengdu and several areas in Beijing which will host the 2022 Winter Olympics are undergoing pilot tests for the adoption of “Digital Currency Electronic Payment (DCEP)”—China’s national digital currency, reported the state-owned media CCTV on April 19. The comment, cited from an official in the People’s Bank of China’s digital currency department, adds the Olympics location to the list of four cities which was reported earlier by Chinese media. The source, however, emphasized that the digital currency was not ready for full commercialization. “It isn’t influencing the traditional distribution system of the yuan currency or the financial market in any way,” the source added. It described the DCEP as the digital version of the yuan currency. While currencies like bitcoins or Facebook’s Libra have less stability as an asset, the digital yuan, on the other hand, is not subject to such a limit as it’s rooted on state credit, claimed the source. #No need to be linked to actual bank accounts As digital yuan’s advantages, the official suggested cost cuts in issuing currency and speed in transactions. Payment in cash takes time and is getting more difficult to manage but the digital yuan will eliminate such problems. According to his explanation, the digital yuan does not have to be linked to an actual bank account and are not restricted to internet connection via PC. Transfers or making payments can happen by bumping smartphones into one another as long as both phones have downloaded the mobile app. #Inflation possibility is low In regards to concerns that issuing a digital currency may lead to inflation, the People’s Bank of China source expressed skepticism. He said the DCEP would be an equivalent exchange of the paper currency circulated in the market. For example, a 100 yuan circulating in the market would be converted into 100-yuan worth of DCEP. “Therefore there would be no risk of inflation,” the source said. The People’s Bank of China and the distributor would offer guarantee that the digital currency would not be issued surpassing the volume of paper currency. According to earlier reports, the DCEP will be issued by the People’s Bank of China, delivered to a distributor, like banks, before it reaches the general public. The distributor should deposit a cash reserve equivalent to the amount of digital currency it wants to issue, to the People’s Bank of China. In other words, digital currency exactly worth that cash reserve can be distributed to the market. The Agricultural Bank of China, the Industrial and Commercial Bank of China, the Bank of China, and the China Construction Bank, as well as WeChat Pay and AliPay were reported as designated issuers of digital currency. #Different to mobile payment There are forecasts that the DCEP’s advent will threaten WeChat Pay and AliPay—the most widely used platforms for mobile payment in China. The official elaborated that the difference between mobile payment and digital yuan will be stark, although the general people may not understand at the moment. Digital yuan is a currency while AliPay and WeChat Pay are methods of payment that are used in link to bank accounts or credit cards. Some disagree. In an opinion piece on Sina Finance, Huang Yiping, deputy dean of Peking University’s National School of Development, pointed out that the digital yuan will be a combination of electronic payment and digital currency. In other words, it won’t be limited to having features as a currency but will come with a payment system of its own. There needs to be more time to truly assess digital currency’s influence to the existing system, he added.