The People’s Bank of China (PBOC) – the country’s central bank – is set to test its much-anticipated digital currency electronic payment (DC/EP) in the cities of Shenzhen and Suzhou, according to local report from Chinese financial news outlet Caijing.
According to reports, the initial pilot for the CBDC is set for the city of Shenzhen before the end of 2019, and may possibly include the city of Suzhou. This new development indicates that the PBoC will become the first Central Bank in the world to issue its digital currency.
PBOC has reportedly partnered with seven state-owned companies to execute the test, which includes four financial institutions and three telecom giants.
Sources close to the matter have claimed that the central bank has introduced a “horse race” amongst the financial institutions from Shenzhen to enable and encourage the companies to develop their own innovative implementation strategies for a successful test-run of the pilot. It is indicated that other locales could be included in the testing, however no exact details have been disclosed.
The article further reads:
“Compared with the previous pilot, this time the central bank’s legal digital currency pilot will go out of the central bank system and enter real service scenarios such as transportation, education, and medical treatment, reaching C-end users and generating frequent applications.”
In the meantime, the financial institutions will be using different strategies for the e-currency implementation.
Whilst some banks will be working with the telecom companies to provide hardware-based solutions that will run electronic currency wallet systems right out of the SIM cards of mobile phones, others have chosen a cloud-based infrastructure perspective using mobile applications for implementation.
According to the article, the pilot program in Shenzhen will be carried out in two phases. The testing will start on a micro-scale before the end of this year with a few participants in each city and then will now be scaled up by next year.
As for Suzhou, although it remains unclear whether the city will be involved in the pilot project, earlier reports from November show that a state-backed fintech company was looking for blockchain and encryption experts in Suzhou. The fintech firm, founded by the PBOC’s digital currency research institute, is said to be responsible for the research and development of DC/EP, as well as offering support for testing the new currency.
Following the news, it is clear that China has capitalized on its efforts to embrace financial technology this year, which may have been prompted by Facebook’s own digital currency project called Libra. Nonetheless, this pilot will make the central bank the world’s first central bank to issue a digital currency, which has been underway for several years.