First Application! China’s Digital Yuan Will Be Distributed as Transportation Allowance for Government Employees
China’s CBDC “DC/EP” will be distributed as a transportation allowance to government employees of Suzhou, a city in southeast China in May. Official documents show the city has required government employees to install digital wallets in April, 50% of their transportation allowance will be paid in the form of digital currency “DC/EP”.
Agricultural Bank of China is conducting internal testing of China’s digital yuan DCEP wallet, and four cities are listed as outlets, namely Shenzhen, Xiong’an, Chengdu and Suzhou according to 8btc’s report. In fact, DCEP has basically completed the top-level design, standard formulation, functional research and development, joint debugging and testing though it has not been officially announced.
The wallet has some digital currency-related functions, including digital currency exchange, wallet management, transaction tracking and connecting other wallets. But these functions are currently unavailable to the general public.
China’s payment giant Alipay has been involved in DC/EP’s technology and hardware research and development, distribution and payment channel technology. DC/EP is featured as traceability, encryption and penetration supervision, while digital currency wallet has the characteristics of opening different identification digital wallets according to different application types, which will greatly improve the efficiency of financial risk supervision and financial fraud elimination.
On February 21st of this year, Alipay applied for a patent — the execution method of digital currency transaction and electronic equipment. From that day to March 17th, Alipay has published 5 patents related to the DC/EP. Alipay has been involved in the research, distribution, payment forms, payment channels, and equipment research of DC/EP. DC/EP adopts a two-layer structure, which requires operating agencies to participate in the secondary issuance. The secondary issuance means Alipay shares the same status as commercial banks.
It is expected that there will be technical feasibility and policy guidance for the official launch of the wallet. The test cycle of bank’s science and technology projects is generally from half a year to one year. In March, China’s central bank has proposed the slogan “unswervingly promote the research and development of CBDC”, so it is expected that it is more likely to issue the digital currency online from government to public.
At present, the scale of M0 in China is 8.3 trillion (the growth rate drops to within 5% year by year). As part of the replacement of M0, it is expected that DCEP distribution will reach a trillion-scale. Limited by customer habits and technical conditions, it depends on the scale of cash transaction replacement and electronic payment replacement.