China set to introduce digital yuan by early 2022

The People’s Bank of China (PBOC) has revealed it aims to fully launch the e-CNY digital currency by February 2022.

The PBOC said that it intends to fully launch the digital yuan currency by the time of the 2022 Winter Olympics.

According to Regulation Asia, the digital yuan will use a two-layer system, where the core layer is centralised using non-blockchain technologies and banks act as intermediaries in the same way they do for fiat currency.

The e-CNY will not include blockchain due to the PBOC stating the technology’s immaturity, performance and scalability shortfalls, however, the currency already has built-in functionality in order to make the digital currency programmable via smart contracts.

PBOC deputy governor Fan Yifei has highlighted that while test runs of the digital yuan has shown great potential, there were still some issues that needed to be solved. These issues included the regulatory system, payment systems and acceptance environments, which Yifei claims still need require improvement and optimisation before there is a full launch.

He also noted that the rules for the treatment of digital currency will be different from those used for fiat currency, with technical infrastructure under development to support the connections between e-CNY and traditional payment systems, as well as between e-CNY digital wallets and bank accounts.

Pilot testing of the yuan has to date been rolled out in Shenzhen, Suzhou, Chengdu, Shanghai, Hainan, Changsha, Dalian, Quingdao, Xi’an and Xiong’an. With the pilot digital yuan, individuals can use the e-CNY to purchase goods online and offline, as well as pay electricity bills, tolls and transport fares.

The cities of Guangzhou, Fuzhou, Tianjin and Yiwu recently revealed they are competing for inclusion for being the next batch of pilot cities.

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