China’s Hainan Province Set For Digital Yuan Test in April
All is set for the next step in China’s move towards the creation of a Central Bank Digital Currency (CBDC). This time around, a test of the developing product will be carried out in the country’s province of Hainan. The exercise is expected to kick- off on April 12, 2021, and run until April 25, 2021.
According to reports, the planned exercise will be conducted by the Industrial and Commercial Bank of China’s Hainan branch, the People’s Bank of China’s Haikou branch, and Sansha city’s municipal government.
Like previous tests before it, this test, which will be conducted specifically within Yongxing Island in Sansha city is aimed at promoting the use of the Digital Yuan which is nearing full development.
During this exercise, participants will receive a 99 yuan ($15) discount for every 100 yuan purchase that they make on the Island. This includes money spent in restaurants, hotels, and even supermarkets.
Another Step Towards a National Project
This exercise will place Hainan among the cities where the Digital Yuan will be tested in the second phase of the testing exercise. The first phase of the test started in 2020, and successful tests were carried out in cities like Shenzhen, Beijing, Suzhou, and Chengdu.
In the second phase, successful exercises have been carried out in Shanghai and Changsha. After the test in Hainan, the exercise will proceed with other cities which include Qingdao, Dalian, and Xi’an. This is expected to happen in the coming months.
China’s journey towards achieving a Central Bank Digital Currency started about 6 years ago. The government’s commitment towards the realization of this project is evident in the efforts that it has put in so far. The various developments towards this project, especially the number and nature of the tests carried out so far puts China in pole position among other CBDC anticipated projects across the globe.
It is widely suspected that the full version of the Digital Yuan could be launched between the end of 2021 and 2022. Many people believe that the winter Olympics which begins on February 04, 2022, could be an ideal occasion for the full implementation of the Digital Yuan by China.
China’s Reasons For Creating a CBDC
Reasons why China is working hard towards achieving its digital currency, have been up for speculation. Many people believe that it is an effort to discourage its citizens from using other cryptocurrencies like Bitcoin, which offers some degree of privacy to users and cannot be supervised or controlled by the government.
To many others, the Digital Yuan is a tool in fighting the trade war between China and the United States, since using the Digital Yuan to facilitate cross-border payments would reduce the dependency on the US dollar and strengthen the Chinese Yuan in the process.
Recently, the People’s Bank of China (PBoC) released a statement to clarify the privacy implications of the Digital Yuan implementation. According to the national bank, the protocol will allow anonymous transactions in small amounts. However, the statement did not clarify fully the extent of control that the government intends to have over the financial dealings of its citizens.
The test in Hainan remains a continuation of a process that China is determined to see through. Other tests are expected to happen in the coming months, as China continues to lead among the nations that are working towards a national digital currency.