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The People’s Bank of China (PBOC) has clarified the spreading rumors that the testing of its DCEP involves large cash transactions.
According to news reports, China’s apex bank, the People’s Bank of China (PBoC) has announced clarifications to curb the spreading rumors that the testing of its digital yuan (DCEP) involves a large amount of money.
The Global Times noted that there were rumors over the weekend that a housing transaction in Shenzhen, south China’s Guangdong Province, was conducted using the flagship Central Bank Digital Currency (CBDC) and that the transaction involves a large sum of money. Responding to the rumors which also alleges that the digital currency could not be converted into banks notes, the People’s Bank of China said that the trial phase is only focused on small retail transactions and has not yet expanded to scenarios that require large volume transactions.
The latter rumor was appropriately countered by an employee of the PBoC who confirmed that the DCEP is the same as yuan in legal tender and is a two-way convertible with banknotes at a rate of 1:1.
The Global Times also quoted Wang Peng, assistant professor of the Gaoling School of Artificial Intelligence at the Renmin University. The professor noted:
“At its current stage, the test’s primary goal is to ensure the digital currency’s operation runs smoothly and safe, and to determine how DCEP is distributed from the central bank to financial institutions. Only when trials in retailing are successful will they be carried out in large transaction scenarios.”
DCEP Testing Has Been Extensive
Earlier this month, Coinspeaker reported that China plans to extend the testing of its digital yuan to the nation’s recognized prosperous cities. The testing plans were made known by China’s Commerce Ministry and will see the government expand its pilot testing program of the DCEP to Beijing, and nearby Tianjin and Hebei province in the north; the Yangtze River Delta to the South; and, along China’s wealthy Southern coast, Guangdong province and the neighboring cities of Hong Kong and Macau.
According to the ministry, the less prosperous provinces with the prerequisite requirements will also develop a model to conduct the trials for the digital yuan in the coming days. Of the countries developing a Central Bank Digital Currency (CBDC), China is arguably ahead of the pack as the CBDC project entered its testing phases earlier in the year, which are being led by the People’s Bank of China.
China’s stride with respect to the advancement of its government back digital currency dates back to around 2016 and the project debuted its first testing earlier in the year amid the coronavirus pandemic in Shenzhen, Xiongan, Chengdu, and Suzhou, where the DCEP is being incorporated into such use cases including transportation, education, healthcare, and other consumer goods and services.
DCEP Project Perceived as a Threat
The digital Yuan or DCEP has been persistently seen as a threat amid the growing US-China economic tensions. Besides these two warring nations, other countries like Japan are motivated to fast track the development of their own CBDC in a bid to curtail any economic dominance that the DCEP may want to wield when it fully goes live.
Nonetheless, China aims to use the DCEP to steer a digital economy and a means to keep the yuan relevant in today’s age of growing digital currencies and tokens.