China’s sovereign digital currency plan becomes a hot guessing game amid leaks and expectations

Trial use of digital yuan will be limited to four cities – Shenzhen, Suzhou, Xiongan and Chengdu – plus the 2022 Winter Olympics venues

The virtual currency could eventually make third-party payment services redundant in country where mobile transactions account for four out of five payments

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Beijing’s minting of the world’s first sovereign digital currency has been shrouded in secrecy, but trial roll-outs are planned for some cities. Photo: Shutterstock

Published: 6:30pm, 20 Aug 2020Updated: 11:03pm, 20 Aug 2020

Discussions about China’s much-hyped sovereign digital currency started heating up again after the Ministry of Commerce unveiled a plan last week to expand trials of the digital yuan across the country, fanning speculation that its use could be much wider than expected.

But the next day, the official Xinhua news agency debunked the speculation. It cited an anonymous source as saying that the pilot schemes for the digital currency would stick to the four previously named cities – Shenzhen, Suzhou, Xiongan and Chengdu – and the venues for the 2022 Winter Olympics in Beijing and Zhangjiakou.

That is a much narrower range compared with the plan unveiled by the commerce ministry, which stated that qualified cities in the Greater Bay Area, including Hong Kong, Shenzhen and Macau; the Beijing-Tianjin-Hebei region; the Yangtze River Delta region, including Shanghai; and some places in central and western China, would be able to use the digital currency.

The seemingly conflicting messages about China’s digital currency marked the latest hiccup in Beijing’s minting of the world’s first sovereign digital currency that has been shrouded in secrecy, with the purpose, function, risks and returns of a digital yuan still unknown.

A leaked screenshot that started circulating online in April purportedly shows a test version of China’s sovereign digital currency. Photo: Handout

While there is no official timetable for the sovereign digital currency, and there has been no white paper about it, leaks and speculations are rife. In April, a leaked screenshot of the digital currency at the Agricultural Bank of China, one of the four state banks partnering with the People’s Bank of China (PBOC) in developing the digital yuan, gave the public a glimpse of what it could look like.

A district in Suzhou was reportedly trying to put the digital currency into use in May by paying half of the travel subsidies given to public sector workers in digital form. Nineteen merchants in Xiongan, including local branches of Starbucks, McDonald’s and Subway, are reportedly ready to test the digital form of the yuan. And Chinese ride-hailing giant Didi Chuxing also said last month that it had entered into a “strategic partnership” with the central bank over the digital currency plan, officially known as the Digital Currency Electronic Payment (DCEP) service.