A move by China to become the first major economy to launch a digital currency, e-RMB is sending shock waves across the world.
The major cities of Shenzhen, Suzhou, and Chengdu, as well as the Xiong’an New Area, will host what China’s official state-run Xinhua News Agency described as ‘internal closed pilots’.
The three cities have a combined population of more than 38 million people while the Xiong’an New Area is a district and economic zone being developed by the government near the cap1ital Beijing.
China’s Digital Currency Electronic Payment (DCEP) project which is the country’s progress towards a digital yuan is known – began in 2014. Central banks around the world are assessing the feasibility of launching their digital currencies – so-called ‘central bank digital currencies’ (CBDCs). But China has regularly communicated tangible progress, as its central bank seeks to become the first to turn years of research and experimentation into reality.
According to a report by the state-owned China Daily, a statement by the People’s Bank of China (PBOC); China’s Central Bank said that the digital currency will not be issued in large amounts” for public use in the short term and that the digital currency in circulation would “not lead to an inflation surge”.
A sovereign digital currency provides a functional alternative to the dollar settlement system and blunts the impact of any sanctions or threats of exclusion both at a country and company level,” last week’s China Daily report said.
Some Government employees and public servants are to receive their salaries in the digital currency from May.
A decline in cash usage is expected to continue amid the growing popularity of digital payment platforms and as people avoid physical contact during the coronavirus pandemic.
It may also facilitate integration into globally traded currency markets with a reduced risk of politically inspired disruption.
