China's progress with a Central Bank Digital Currency (CBDC) has been one of the most interesting stories to come out of the global crypto industry in the past year. The country made significant waves after President Xi Jinping gave a rousing speech in favor of blockchain technology in October 2019, and it hasn't looked back since.
With several tests headlining China's CBDC efforts in 2020, the country is picking up right where it left off and is now ramping up adoption and promotion of its asset in preparation for a launch possibly soon.
More Tests Come In
On the back of the significant progress made with testing and trials last year, the Peoples' Bank of China has not slowed down. This year alone, the bank has run several other tests as it now looks to improve on its digital yuan infrastructure.
The first test for the digital yuan for this year came on January 4. According to an announcement from the Shenzhen government, citizens would be able to register and partake in a municipal lottery that will see some people win units of the asset. The initiative is part of a New Year's offering, and registrations would only be open for a short period.
The government explained that the lottery isn't a competition. Instead, it will provide asset tokens to people on a first-come-first-serve basis. All in all, the government planned to give 10,000 "red envelopes" to lottery winners. Each of the envelopes will contain 200 units of the digital yuan, worth about $31. Combined, the envelopes are worth about $3.1 million, and recipients would be able to spend their tokens across over ten thousand supported merchants.
To spend their tokens, lottery winners would have to download and install an app that gives them an instant digital wallet. This is in addition to their IDs and phone numbers, which they already gave as part of the registration process.
The new initiative is part of a grander scheme to provide publicity for the government's digital yuan trials. The Shenzhen government set two stipulations for residents who would like to partake of the lottery – they will need to get social insurance from the companies they work for, and they will need to stay in the city for the Lunar New Year holiday.
As noted, this lottery's conditions make it slightly different from any that the region operated in 2020. The Shenzhen government has been active in promoting the digital yuan, with two giveaways occurring last year. One happened in the Futian District, and the other occurred in the Luohu District.
In their announcement for the scheme, local news sources presented it as a pilot effort for the upcoming currency. Beyond just promoting the digital yuan, however, the giveaway also provides an opportunity for the government to keep people in Shenzhen and control the ongoing coronavirus pandemic.
Easy ATM Access
Along with the governments, financial institutions are also doing their bit to keep the digital yuan fresh in citizens' minds. Last week, local news sources reported that the Agricultural Bank of China, one of the country's largest banking institutions, had installed ATMs for citizens to make withdrawals of their digital yuan tokens.
The ATMs were reportedly installed to allow winners of the red envelope lottery. With them, winners can deposit and withdraw funds, and they can also convert their savings and cash holdings to the CBDC. Zou Hua, the head of the Agricultural Bank of China's Digital Yun Innovation Lab, told news sources that the rollout was part of their efforts to provide an effective and easy pathway to cash digitization.
"Agricultural Bank has taken the lead in launching the ATM cash deposit and withdrawal function in the industry to guide Shenzhen residents to adapt to the digitization of cash and explore service transformation," he said in part.
Taking the Lead
The Chinese have now become too engrossed with the digitization of cash that they are looking to ensure easy onboarding for other countries that make the same move. Considering that they are ahead of everyone else in CBDC development, the country is looking to become a hub for all CBDCs that eventually get developed.
Last week, the Blockchain Service Network (BSN), China's national blockchain project, announced in a blog post that it planned to pilot a system to ensure seamless integration with all CBDCs.
According to the blog post, the BSN is looking to develop a universal digital payment network based on the CBDCs of other countries. While in its design stage, the network is expected to launch a beta in the second half of 2021. On the flip side, full network development is set to take about five years.
With the network, the BSN is looking to provide a standard digital currency transfer system, complete with payment procedures. The system is looking to combine several sectors – including insurance, banking, technology, enterprise resource planning, and more. It will use APIs to ensure a low-cost, high-security payment solution.
"This digital payment network will completely change the current payment and circulation method, enabling a standardized digital currency transfer method and payment procedure for any information system," the BSN explained.
By delaying full deployment for five years, the BSN hopes to launch in time for other countries to finish up with their CBDCs. If it can put itself at the forefront of CBDC applications, China can do more than just improve its digital yuan adoption.