China has launched a second trial of electronic cash with over $3 million-worth of e-yuan distributed among 100,000 residents in the tech hub of Shenzhen, double the number of participants in an earlier trial. People have until January 17 to use a phone app to spend the digital cash at selected stores and on some online platforms.
The background
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- The digital cash, officially dubbed Digital Currency Electronic Payment (DCEP) and backed by China’s central bank, is aimed at challenging US-dollar dominance in the global financial system, plus helping authorities to keep greater control of cash flows, reports the SCMP.
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- The digital cash concept has come about as handling physical coins and notes has become gradually less popular among businesses and consumers – a trend that’s been accelerated by the coronavirus pandemic.
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- At least one company, keen to embrace the new digital-currency concept, jumped the gun. NIO, jointly producing an electric car with Toyota’s Chinese partner, first announced it would accept bitcoin from customers, the SCMP reported. Bitcoin transactions are illegal in the country. The company then changed this to e-yuan, but had to cancel this too because it does not yet have regulatory approval to accept digital currency.
What’s next?
China may become the first country in the world to launch digital cash, but many others are heading in the same direction – a number of G20 countries say they are exploring the concept. Norway, Sweden, Switzerland and Cambodia have also announced they are looking at introducing digital currencies.
