central bank of china

Central Bank of China to Test Digital Currency in Shenzhen and Suzhou

The central bank of China is on schedule to test its national digital currency. The test will soon begin in the cities of Shenzhen and Suzhou. Reports also come that four state-owned commercial banks collaborate with three telecom giants in China. Why? Because the collaboration aims to find the best implementation strategies of digital currency.

The People’s Bank of China (PBOC) is one of the country’s central bank that will soon begin testing its much-awaited digital currency electronic payment. PBOC will be the first bank in China to take this opportunity. In fact,  it is the first bank in the world to issue digital currency.

According to the announcement, PBOC partners with seven state-owned companies to roll out the test among which four are commercial banks and three are telecom giants. In doing so, it encourages to come up with their self-made implementation strategies to leverage benefits. Moreover, the pilot program will concentrate more on education, transportation, commerce, and medical care. While some banks choose to collaborate with telecom giants to develop SIM cards with built-in crypto wallets, others planned for developing independent wallet apps.

What’s the Plan of Action by the Central Bank of China?

The Shenzhen pilot program will go through three phases of testing to prove it’s ready to hit the mainstream. The digital currency electronic payment can only then promoted widely. However, small-scale testing is still pending which will end by the end of this year. Meanwhile, the city of Suzhou is also planning to test the new digital currency. A report from last month suggests that a PBOC-backed fintech company was looking for blockchain & encryption talents in Suzhou.

The fintech firm, founded by PBOC’s digital currency research institute, is responsible for the R&D of digital currency electronic payment. It also provides support to test new digital currency. Facebook’s cryptocurrency project, Libra, motivates PBOC to carry out its digital currency plan ahead of the original schedule. The digital currency initiative by the central bank started in 2014. But the officials have started talking on China’s digital currency now after the social media giant, Facebook, announces its Libra project in June.

Previously, the central bank wasn’t doing any hurry; but now they have accelerated all of a sudden. Commercial banks under the new digital currency electric payment model will first obtain the digital currency from PBOC by depositing RMB reserve. Only then users and businesses can register digital wallets with commercial banks to use digital currency – according to Mu Changchun, director of PBOC.

Well, China is not the only country today that wants to lead in issuing digital currencies. The Bank of France has recently announced that it is going to test digital currency in 2020. Again the joint conference held between European Central Bank and National Bank of Belgium on the potential of digital currency scrutinizes that digital currency can ensure citizens that they can use central bank money even if cash is no longer used.