China’s new digital currency begins pilot testing

“The People’s Bank of China [PBOC] will become the first central bank to launch its own digital currency,” we predicted in our 2020 Red Paper published in January. This prediction was based largely on the enthusiasm that Beijing clearly had for blockchain technology in late October last year, when the National People’s Congress passed a new law on cryptography, and Xí Jìnpíng 习近平 gave a speech calling for “greater urgency in the development of blockchain technology.”

Now the PBOC’s digital currency has begun trials in four cities — Shenzhen, Suzhou, Chengdu, and the new city of Xiong’an — the Wall Street Journal reports (paywall). The trials are limited, with some civil servants in Suzhou beginning to receive half their transport subsidies in the new currency as a start, for example. Other things to know about it include:

• The currency still has no official name, but it is known for now as “DC/EP,” or “digital currency/electronic payment.”
• Unlike bitcoin, it is not anonymous. More tracking and control of currency flows is a large part of Beijing’s motivation for creating this.
• It is intended to replace some, but not all, of China’s existing monetary base.
• Its launch now is “in part to prepare for the 2022 Winter Olympics in Beijing,” according to the central bank’s research institute.
• There is no official timetable for a nationwide launch of the currency.

The cities with the pilot trials have been active in blockchain development in China for years — see Blockchain in China: Local is everything, published in August 2018 on The China Project, which gave an overview of initiatives in Shenzhen, Suzhou, and Xiong’an.

For more on the new digital currency, see Caixin: China starts trial of digital currency in four cities. For those following blockchain news in China, see CoinDesk: Blockchain now officially part of China’s technology strategy.