Beijing, China’s capital city, has initiated a booking of digital yuan to the residents in the city on Sunday, February 7. Beijing has issued 10 million digital yuan ($1.55 million) via red envelopes to locals to increase consumption during the upcoming Spring Festival holiday.
As per a statement posted on the local financial regulator’s official WeChat account, a total of 50,000 digital red envelopes, each worth 200 yuan, will be issued to the residents by the lottery process from Wednesday (Feb. 10) onwards.
The locals can apply for the digital yuan, which is backed by the central bank of China, from Sunday to Monday. Lottery winners will be able to use the digital yuan from February 10 to February 17 in selected online and physical shops, cinemas, hotels and other areas.
The Olympic Winter Games Beijing 2022 will take place a year later in February, which also coincides with the Chinese New Year. The trial of digital red packets aims to support offline and online consumption of digital currency in the Winter Olympic Games for various purposes such as dining, accommodation, transportation, shopping and entertainment.
The financial regulator of Beijing ensures to conduct more trial applications of the digital currency surrounding the Beijing Winter Olympic Games 2022. The trials focus to enhance the building of demonstration zones for the application of digital currency and to create a good payment environment for the Olympics.
“The previous tests target Chinese residents’ ordinary payment scenarios, but as flocks of foreigners will come to the Olympics,” Wang Peng, an assistant professor at the Gaoling School of Artificial Intelligence at the Renmin University of China, told the Global Times on Sunday.
“It will be a great time then for the country to promote its digital currency, enabling foreigners to register and use it,” he added.
Locals can obtain and expend the digital yuan without the bank cards of the six Chinese commercial banks – Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China, China Construction Bank, and Bank of Communications, and the Postal Savings Bank of China, according to the statement. These banks have been participating in the research and development of digital currency.
Beijing is the third city in China to conduct the trial of digital currency. Similar trial projects were launched in Shenzhen and Suzhou previously. Furthermore, the trial is expected to be launched in more cities, such as Shanghai and Changsha, this year.
What is digital yuan?
The digital yuan is simply a digital version of the Chinese national currency – yuan. It is a form of Digital Currency Electronic Payment (DCEP) system which is backed by the central bank in China. The digital yuan has been under development for more than five years in China.
The digital yuan is designed to replace cash in circulation. Commercial banks have a role to distribute digital currency to businesses and citizens, but before that, they need to deposit exactly the same amount of their reserves with the central bank to convert the amount into digital form.
DCEP will enable authorities to track all digital cash in circulation, which will have a significant impact in discouraging money laundering, tax evasion, corruption and terrorist financing.
Is digital yuan a cryptocurrency?
No, it isn’t. It is a digitized version of China’s physical currency.
The digital currency is controlled by the government, however, cryptocurrencies are decentralized and are not with the control of a single entity. Besides, cryptocurrency is anonymous whereas digital yuan is traceable by the country’s authorities.
Crypto currency trading, until now, is illegal in China.