China to test digital version of its currency at 2022 Winter Olympics

Peer-to-peer currency exchange without an institution in the middle but with 'controllable anonymity' for central bank

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China will test a digital version of its currency at the 2022 Winter Olympic Games in Beijing.

News of the trial came in an interview conducted by Chinese financial journalists with People's Bank of China governor Yi Gang, and hosted on the bank's website. The People's Bank is China's central bank and has much the same role as the Bank of England or the USA's Federal Reserve.

In the interview, Yi said China "has basically completed the top-level design, standard formulation, function development, joint debugging test" for a digital version of the Yuan, the nation's currency. The governor said the currency will offer "cash substitution, and controllable anonymity" and be usable without any financial institution being involved in a transaction.

The latter is important as other digital payment systems revolve around private companies that charge transaction fees, mostly to merchants. China's vision is for device-to-device transmission of digital currency that can change hands as if it were cash.

"At present, the digital RMB [Yuan] research and development work follows the principles of stability, safety, controllability, innovation, and practicality," Yi said in the interview. "First, internal closed pilot tests are conducted in Shenzhen, Suzhou, Xiong'an, Chengdu, and future Winter Olympics scenarios to verify theoretical reliability and system stability. Performance, function availability, process convenience, scenario applicability, and risk controllability."

(The Olympics reference denotes Beijing's role as 2022 host of the winter games.)

But the governor also took care to say the tests may not result in the introduction of digital cash.

"However, the current pilot test is still a routine work in the research and development process, and does not mean that the digital RMB will be officially issued," he said. "There is no timetable for when it will be officially launched."

Yi said the reason for the tests is that "the digital economy is an increasingly important driving force for global economic growth" and "legal digital currency is conducive to efficiently satisfying the public's demand for legal currency under the conditions of the digital economy, improving the convenience, security and anti-counterfeiting level of retail payments, and accelerating the development of China's digital economy."

And that economy could use a spot of acceleration. Yi detailed the impact of what China calls "The Great Suspension" of the world economy due to the COVID-19 pandemic, including a 6.8 per cent year-on-year GDP contraction in China during 2020's first quarter. But the governor also said that indicators of manufacturing activity have turned in positive directions in recent months. ®

Bootnote

Beijing will become the first city to host a Summer and Winter Olympics, even repurposing the "Ice Cube" used for aquatic events at the 2008 summer games as a curling venue in 2022.

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