China is now launching the initial trials for its government-backed blockchain-based digital currency in select regions across the country. According to the People's Bank of China, the country's central bank, the technology's application in real-world situations will need to be tested first before it is introduced to the public.
The country's digital currency is aimed at eventually replacing paper notes and coins in circulation to promote China's push to further develop its digital economy. The testing of the technology is reportedly being done in closed environments and will remain disconnected from the country's existing currency issuance and circulation system.
A senior official from the digital currency research institute of the PBOC revealed that pilot programs are being launched in cities and provinces such as Shenzhen, Chengdu, Suzhou, Hebei Province, and Xiongan New Area. The central bank is also conduction simulations involving the use of the digital currency for the Beijing 2022 Winter Olympics.
In a post on the PBOC's official WeChat account, the central bank stated that it will initially be the issuance of a small amount of the digital currency to the public. The bank stated that the velocity of its injection of the digital currency will be tightly controlled to prevent an inflation surge.
The country's central bank added that it will be the sole issuer of the sovereign digital currency, with the first wave being offered initially to commercial banks and other operators. The issuance of the so-called digitalized renminbi will be under a newly established centralized issuance system.
In the months following the public release of the digital currency, people should be able to make transactions using both paper and digital money, including making deposits to electronic wallets. Commercial and financial institutions will be required to set aside provisions that are equal to their digital currency holdings. The PBOC stated that the measure should ensure that there is now excessive money issuance during the initial phase of the rollout.
China has long been and proponent and supporter of digital currency technology. The country initially started its research on the technology back in 2014. Chinese President Xi Jinping openly called on the country to further develop the technology and to adapt it to its current financial systems. In 2017, the State Council had approved the PBOC's digital currency development program with the cooperation from several commercial banks and institutions.
Earlier in the month, the central bank had stated that the development of the country's digital currency has largely not been disrupted by the spread of the coronavirus. The PBOC even used the pandemic as motivation to rush the development of the technology as using digital currency will be much safer than physical money as it could promote the further transmission of the disease.
