The central bank has been quietly working on the project for five years.
What do we know?
Since 2014, China’s central bank has been working on a project called “DC/EP”: Digital Currency/Electronic Payments.
Yi Gang, the governor of the People’s Bank of China, said the plan was not to create a new currency, such as bitcoin or Facebook’s Libra project, but to partially digitise China’s existing monetary base, or cash in circulation.
Mr Yi has said the new digital currency will not replace other parts of the money supply — such as deposits held in bank accounts, and balances held by payment apps such as WeChat and Alipay. Retail banks and fintech companies will continue to manage customer deposits in the same way, but the new digital currency could provide a neater way for banks to settle payments with each other, rather than through the existing clearing system.
The central bank added that there was no timetable for the launch, but China appears to be ahead of other countries undertaking similar research.
“Most central banks are studying this, with Singapore, Canada and Switzerland having done advanced trials, but it’s likely that China will be the first to launch,” said Thomas Olsen, partner at Bain & Company in Singapore.
China is already well on the way to being a cashless society. Residents of its big cities often only carry their smartphones and pay for everything with apps such as Alipay or WeChat that are linked to their bank accounts. Chinese users have got used to scanning QR codes to pay or to transfer money to each other, and are likely to be comfortable with using the same process to transfer digital money between digital wallets. ft.com