The People’s Bank of China has initiated the highly-anticipated Central Bank Digital Currency (CBDC) pilot trials in the Hainan Province following tests in other regions of the country. The tests will last from April 12 to April 25, 2021. The government officials of Sansha City, along with staff members, enterprises, and permanent residents, will be participants in the pilot tests.
As the main objective of the CBDC trial, the PBOC team will strive to create awareness about the use of digital Yuan amongst the locals. The project will highlight the benefits of digital currency, encourage secured transactions, and promote better access to financial services and tools. The participants involved in this testing phase will be rewarded with a 15% discount for every 100 Yuan they spend on the island.
A Vision for the Future
The People’s Bank of China has been working hard to develop its native Central Bank Digital Currency in the country. The project will help people shift to a blockchain-powered currency system from the traditional payment channels. The digital Yuan is presently in its trial phase, and the authorities are conducting its pilot run as a retail asset in different parts of the country. In bigger plans, the PBOC aims to expand its coverage to other countries, and for this, the PBOC and the Hong Kong Monetary Authority are experimenting with its international use. The PBOC includes AliPay and WePay to encourage the adoption of digital currency. The partnership has allowed WeBank and MyBank users to access their funds using the PBOC run CBDC app.
Why is the Biden Administration concerned about this CBDC project in China?
Officials from multiple US government departments are getting up to speed on China’s CBDC project, concerned about its potential long-term impact on the U.S. dollar. Officials at numerous government departments, Treasury, State Department, Pentagon, and National Security Council, are reinforcing their efforts to investigate the potential implications of the central bank digital currency’s (CBDC) digital yuan can have.
The U.S departments are concerned about the long-term impact the digital Yuan might have on the Dollar’s status as the global reserve currency. The Biden administration isn’t currently planning to take any action to counter longer-term threats from China’s digital currency, but discussions about the possibility of a digital dollar are taking place.
Federal Reserve Chairman Jerome Powell stated that they are working on a digital dollar project for the country. Powell said no final decision had been made, adding that it would be an important step that required the involvement of the public and Congress.