The People’s Bank of China (PBoC) is set to test the electronic payment system in digital currency (DC/EP) between the cities of Shenzhen and Suzhou, the Chinese local media reports.
Seven pro-government companies will participate in the testing. Among them are four commercial banks and three telecommunications giants such as the state-owned China Mobile, China Telecom and China Unicom. Caijing states that China’s central bank gave companies almost complete discretion and encourages competition among them.
Note, that one of the banks that allegedly will participate in testing last week issued bonds based on blockchain technology. Bank of China, one of the four largest banks in the country, has placed $2.8 billion worth of securities. The effort is aimed to support the small and medium business sector.
Earlier, the People’s Bank of China deputy director Mu Changchun, also said that Chinese companies will compete with each other for the power to provide the best tools based on the central bank digital currency (CBDC).
He compared the regulator’s approach to horse racing – the leader of the race will occupy almost the entire market. Mu emphasized that PBOC is neutral towards all technologies, however, the technical decisions of the leader are likely to be adopted by other players as well.
The pilot program will focus on key industries such as transportation, education, trade, and medical services. However, some companies participating in the program intend to create SIM cards with built-in digital wallets, while others will develop software solutions. It is likely that in the first case we are talking about state-owned telecommunications companies.
The media states that the pilot program will be launched in two stages. The first stage that takes place at the end of 2019, they will conduct a series of local tests. However, the participants will engage in the full-scale promotion of DC/EP in 2020. Delta Fintech subsidiary fintech company is responsible for the development and implementation of the system.
PBOC Will Act As The Main Issuer Of The Digital Renminbi
Note, that China is set to release its CBDC before embattled Facebook launches stablecoin Libra. PBOC will act as the main issuer of the Digital Renminbi. At the same time, commercial banks will act as distributors. Recall, that Wechat and Alipay can be used as payment systems.
Perhaps, the PBOC already has a ready-made technological solution, but the Chinese regulator does not say anything about its details.
Over the past two years, Chinese authorities have banned ICOs, direct transactions with bitcoins and refused to recognize cryptocurrencies as a means of payment.
With the available information about the People’s Bank’s new token, we can conclude that this is not about a technological breakthrough, but rather about the state’s attempt to become a key player in the cryptocurrency market as well.