Having completed limited public tests in Beijing, Hong Kong and a number of other cities, the People’s Bank of China is internally testing its digital currency for a full launch.
English-language local news outlet Global Times reported on Sept. 24 that the development of China’s Digital Currency/Electronic Payment (DCEP) system has given its results and the technology is undergoing PBoC internal testing. Fan Yifei, deputy governor of the PBoC, explained:
“The internal testing is mainly to test the technical reliability and maturity of the digital currency. The internal test requires that the digital currency should only run within a very clear boundary, which is quite demanding for the test scenario.”
Internal testing of the technology is meant to precede larger-scale external testing for caution’s sake. External tests will happen when the system reaches a certain volume of transactions. The PBoC’s official remarks follow recent reports that the central bank digital currency (CBDC) in question is ready for deployment.
This is not the first announcement of DCEP tests being conducted. In mid-August, Modern Consensus reported in mid-August that the digital currency was already undergoing limited tests in Beijing, Hong Kong, Macau, Shenzhen, Suzhou, Chengdu and Xiong’an, as well as the wealthy Guangdong province. Furthermore, earlier this week local media revealed that Chinese e-commerce giant Jingdong has announced plans to integrate a digital wallet into its massive JD.com e-commerce ecosystem.
The central bank previously said that the issuance and control of a digital currency is a “new battlefield” of financial competition between sovereign nations. The reason is that the bank believes a CBDC will bring great changes to existing international finance. An article in the PBoC’s China Finance that said:
“China has many advantages and opportunities in issuing fiat digital currencies, so it should accelerate the pace to seize the first track.”
PBoC’s will to make its CBDC an integral part of the future financial system was already made clear in mid-September, when Yifei said that DCEP acceptance will be mandatory for all of China’s residents. He explained that the digital currency will fall into the bank’s M0—also called narrow money—supply, which means that it will be legally considered equal to cash.
Another result of DCEP being classified as M0 legal tender is that it will have to comply with laws and regulations such as large cash management, anti-money laundering, and anti-terrorist financing.
Updated 7:12 a.m. Sept, 28 , 2020, to correct byline.