It is the largest pilot test for a virtual currency. The People’s Bank of China issues the electronic Renminbi or e-RMB for the payment of salaries in four cities.
China implements this week the largest pilot test to date for virtual currencies. The Chinese Central Bank developed in recent months the e-RMB, the electronic renminbi, to be the first virtual currency in a country. Until now, the powers have been regulating their use, but it is not the central banks that issue them as in this case.
In the case of China, the idea goes beyond joining the global trend of reducing the use of cash – a phenomenon that the coronavirus accelerated – it seeks to become an alternative to the dollar for international trade, according to reports published in the Chinese press. .
A statement published by China Daily last week noted that the Central Bank warned that in this first stage “it will not issue a large amount” and denied that it can generate inflation. While an analysis column in the same medium explained that “A digital sovereign currency provides a functional alternative to the dollar payment system and mitigates any threat of exclusion or sanction at the country or company level. It can also facilitate integration into global currency markets with low risk of political breakdown.
The stability of the Chinese yuan during the Covid-19 crisis improved its attractiveness to many investors. These two payment systems – that of the US dollar and the Chinese digital currency – can coexist or, if necessary, do so on a mutually exclusive basis. ”
For now, the currency has to achieve local acceptance and circulation. The first cities where it will be tested are Chengdu, Suzhou, Shenzhen and Xiong’an, a region south of Beijing where the Winter Olympics will take place in 2022.
According to the English newspaper The Guardian, the Chinese press reported that many public employees will begin to collect their salaries with this digital currency from May. In the city of Suzhou, for example, its use will focus on subsidizing public transport, while in Xiong’an it will be used for shopping and food purchases. There, they even offered food giants Mc Donald’s, Starbucks and Subway to participate in the experience, but from Starbucks they assured that they will not be part of this pilot test.
Until now , electronic wallets were frequent in China , but they did not replace the currency. This initiative would allow the Central Bank to track transactions in real time.
According to the British media, Professor Xu Yuan of the Peking University National Development Research Institute assured the CCTV signal that: “Although the change is minimal from the user’s perspective, from the perspective of the Bank’s supervision Central, the future forms of finance, payments, business and social governance among others, this is the biggest change ever. ”
Indeed, blockchain technology revolutionized the world of transactions and, experts point to it as a Copernican change because it would allow citizens to become independent from the seigniorage of Central Banks, something that the People’s Bank of China could avoid taking the lead and imposing its currency to also be used as a standard for exchange with other countries.