So-called digital central bank currencies (CBDCs) are gaining momentum. China wants to be the first to put its experiment into practice and has announced that its pilot program for the digital yuan will support 11 more cities. Some of the residents have already joined the local wallet system.
China’s central bank, the People’s Bank of China, will expand their pilot project with their CBDC. This expansion includes 11 more cities, adding to its already considering selection of cities where the CBDC is active. Among these cities is Hangzhou, which will host the Asian Games in September 2022.
Expansion to new cities
The new cities that will take part in the pilot program include Tianjin, Chongqing, Guangzhou, Fuzhou, Xiamen and the Zhejiang province. Some residents in these cities have already been able to access the digital Yuan wallets from Apr. 1 and it also received international exposure with its use during the Winter Olympics.
The current rate of transactions per second (tps) is 10'000, with a future target of 300'000 tps. Reportedly, the digital Yuan has recorded over $13.75 billion worth of transactions. However, one report noted that many wallets have been opened, but not as many that are actually being used. For lower balancers, individuals can sign up for a wallet with just a phone number. Higher transaction limits and usages require more KYC information. This has led to issues about privacy, which remains a concern as the government develops the technology.
Meanwhile, other countries are just beginning to work on their own CBDCs. The United States has announced that it will take the initial steps of reviewing a digital dollar. India, one of the fastest-growing major economies, has also announced a review of a digital Rupee.
Launching CBDC despite crypto ban
China’s digital yuan experiments have been quite successful and have led other countries to rush to catch up. It is among the first countries to launch a CBDC on such a large scale and by all accounts, China’s tech enthusiastic citizens have been happy with the project. As for cryptocurrencies themselves, China has banned the holding and trading of cryptocurrencies, as well as crypto mining.
Its supreme court has called crypto transactions “illegal fundraising.” Those who deal in crypto transactions can face up to ten years in prison or thousands of dollars in fines. China is keen on using the blockchain technology from the supply chain to administrative use cases, as noted by its blockchain strategy for the decade ahead.
