As China expands its pilot testing, the country plans to launch its digital yuan for use before the 2022 Winter Olympic Games.
The People’s Bank of China plans to use the digital yuan at the 2022 winter Olympic games in Beijing. Although there is no schedule for the rollout, the Chinese central bank is presently conducting internal tests in Shenzhen, Suzhou, Xiong’an and Chengdu.
Before now, the People’s Bank of China has been developing its own digital currency. In April, China began the trial of its digital yuan in Xiong’an area. Since then, the trial has expanded to more regions in the country.
China to Use Digital Yuan at the Olympic Games
Coinspeaker reported earlier this month that the Chinese government planned to expand its pilot testing program of the digital currency to more areas. These areas are Beijing, nearby Tianjin, and the Hebei province in the north. Others include the Yangtze River Delta to the South, the Guangdong province, and Macau. Tests are also ongoing in Hong Kong.
China’s central bank digital currency (CBDC) is a digital currency electronic payment (DCEP). With the ongoing pilot testings, the Chinese digital yuan is expected to be the first operational digital currency in China.
In addition, a Global Times report revealed that the Chinese digital currency is focused only on small retail transactions. Before the report, there were rumors that a housing transaction in Shenzhen supported the use of the DCEP. According to the report, some internet users said someone in Shenzhen received a large amount of digital yuan as payment for local property sales. However, the seller supposedly could not convert the digital yuan to banknotes. However, the People’s Bank of China clarified that the digital yuan can be converted into banknotes at a 1:1 ratio.
Now, there is a possibility that the PBoC will launch China’s digital currency before the 2022 Winter Olympic Games as there are plans to use it during the international event.
China Plans to Maintain its Monetary Policy
The head of the monetary policy department at the People’s Bank of China Sun Guofeng commented on the country’s monetary policy. Speaking in a press conference, Guofeng revealed that the central bank will not make any changes to this monetary policy. This suggests that at launch, the CBDC will operate under the same framework.
Considering the negative impact of the coronavirus pandemic on businesses, the Chinese government has urged banks to offer cheaper loans. In addition, Guofeng said that fiat currency will be reasonably adequate to aid the rebound of China’s economy. He added:
“To cope with all sorts of uncertainties, the monetary policy requires greater certainty.”
The vice president of the PBoC Liu Guoqiang talked about the banking sector’s capital adequacy ratio. At the end of June, the banking sector’s capital adequacy ratio dropped to 14.21%. Nevertheless, the percentage is till more than the regulatory standards of 10.5%, Guoqiang said. He also added:
“Even as capital adequacy ratio drops further in the future, we cannot lower regulatory requirements. Doing so would be fooling ourselves.”
Rather, the vice president said that banks can use perpetual bonds and second-tier capital to replenish their capital.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
