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China Tests CBDC, Holds 10 Million Digital Yuan Giveaway in Shenzhen

China Tests CBDC, Holds 10 Million Digital Yuan Giveaway in Shenzhen
  • In the form of red envelopes, 50,000 lucky winners can claim their digital yuan through the official Digital Renminbi app.
  • People Bank of China (PBOC) issued 10 million yuan for the giveaway.
  • “One day everyone in the world will be using DCEP,” says Chandler Gou.
  • Citic Securities estimated China’s digital currency to be 1 trillion yuan ($140 billion).

Today is the deadline for Chinese residents in the city of Shenzhen to register online and get a chance to receive their digital red envelopes with 200 digital yuan each inside.

A total of 10 million yuan ($1.49 million) in the form of China’s central bank digital currency (CBDC) is up for grabs. This is the first digital currency trial done as part of the proposed Digital Currency Electronic Payment (DCEP) of the People Bank of China (PBOC).

Digital yuan giveaway for 50,000 customers

The digital yuan giveaway will be done via lottery in the Luohu district of Shenzhen. In the form of red envelopes, 50,000 lucky winners can claim their money through the official Digital Renminbi app.

Once selected, the customer will receive a text message with the link to the digital wallet. They can use these digital yuans for purchase of goods and services. Particularly at 3,389 designated merchants of the same district from October 12-18, 2020.

Known as the Silicon Valley of China, Shenzhen is one of the pioneer cities to test the country’s CBDC. Participating merchants include supermarkets, gas stations, subway transportation, and department stores such as Sinopec, Walmart, and CR Vanguard.

Shenzhen’s digital yuan giveaway aims to boost usage of the new government-backed digital currency. This will eventually drive forward the DCEP, a concept inspired by the success of digital payment platforms like AliPay and WeChatPay.

China’s DCEP system coming into shape

The giveaway campaign puts China at the forefront of central banks worldwide. These banks are racing to issue their own digital currencies to modernize payment systems. “One day everyone in the world will be using DCEP,” says Chandler Gou, one of the largest Bitcoin miners and blockchain investors in the world. He said this while taking into consideration the fact that there are millions of Chinese people residing outside the country.

According to the PBOC,

The DCEP can accelerate the progress toward a cashless society and enhanced financial inclusion.

To put it simply, digital yuan powers DCEP. Furthermore, it eliminates the need for physical cash and online payment services. Unlike crypto’s volatility, PBOC’s digital yuan intends to be stable.

Moreover, there are various advantages of DCEP. The most important one is offering the public a more convenient, efficient, and low-cost mechanism for cross-border and e-commerce payments. Despite that, it also takes away the anonymity of transactions while reducing personal privacy.

Huang Yiping, deputy dean of the National Development Research Institute of Peking University previously stated that the Chinese economy is entering into a new phase of development. But with the recent progress regarding digital yuan, he pointed out that,

It is necessary to make an in-depth observation of the limited digital currency of the central bank to see how it will affect the current digital financial landscape.

With four out of five payments being done through mobiles, China is a known leader in terms of mobile transactions. Notably, it recorded 347 trillion yuan ($49 trillion) in 2019. In line with this, Citic Securities estimated China’s digital currency to be worth 1 trillion yuan ($140 billion) later on.

In comparison, the total market capitalization of cryptocurrencies is over $350 billion, at the time of writing.

An aspiring journalist who spills her ideas in cryptocurrency and blockchain-related matters. With her background in Communication and Journalism, she is more inclined to write about reality than fiction.