China races ahead with digital tender development

With China’s central bank having given the green light for some commercial lenders to run trials of its digital currency, it looks like it will become the world’s first major monetary authority to issue its own digital tender.

State-owned Chinese banks are reportedly conducting internal, hypothetical-use tests of a People’s Bank of China digital currency in areas such as Suzhou, Xiong’an, Chengdu and Shenzhen.

The functions of the “pilot” digital wallets include conversion between cash and digital money, account-balance check, payment and remittance. The central bank though has not responded on the trial.

But there are reports that China’s central bank has led global peers in development of digital legal tender, setting up a separate research team for the task and filing hundreds of patents. At a meeting earlier this year previewing the work in 2020, the bank said the research is going smoothly, though it hasn’t named a specific timetable for when the currency would be released to the public.

The digital currency will aim to partly replace cash to adapt to the increasing dominance of digital payments in China’s retail sector.

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