Chinese telecom operators are becoming increasingly interested in adopting the digital yuan as the CBDC discovers new adoption zones, a recent report has said. The federal People’s Bank of China (PBoC) is eager to include the country’s largest operators, such as China Telecom and China Unicom, more deeply in the pilot, according to EY (via Sohu).
Telecom firms to accelerate digital yuan adoption
The PBoC believes telecom companies can assist in accelerating the digital yuan adoption. The central bank unveiled an offline SIM card-based digital yuan “hard” wallet option earlier this month. The technology enabled customers to pay with the CBDC even when their phones are off, or there is no network access.
While the solution is currently only accessible to owners of Android smartphones, telecom companies, and banks could work to broaden their possibilities to include 2G mobile clients. Most Chinese rural residents, especially older people, own 2G phones. Furthermore, these groups are often the least technologically literate in China which is another factor suggesting the country may soon see a boom in SIM-based digital yuan solutions. According to EY, the “threshold for use” of the SIM-based solution is very low.
The CBDC will “make up for the ‘digital divide,'” according to the central bank, and would increase financial inclusion. Furthermore, according to EY, SIM-based wallets offer better security key management features. They enable encryption techniques that promise a higher security level than software-based solutions.
A significant number of telecom companies have indicated they are ready to collaborate with the PBoC on the SIM wallet option. According to the recent report, they regard it as a crucial item for long-term development. The companies also intend to include the digital yuan in their 5G and Internet of Things (IoT) operations and are looking at how to incorporate it into their payment systems. Smart electronics charging stations, public energy networks, shared bicycles, and smart utility meters might all be integrated into wallets.
Over 36 million digital yuan wallets have been opened within the boundaries of Shenzhen to date, according to a statement made by the city earlier this week.
China sees increased digital yuan use
As part of a digital yuan shopping festival that began this week, visitors from Mainland China can now purchase in Hong Kong using the digital yuan. The event was started by Bank of China (Hong Kong) Limited (BOCHK), one of the three commercial banks that issued notes in the city after BOCHK started testing cross-border digital yuan payments in Hong Kong last year.
From July 18, customers with Bank of China digital yuan wallets could purchase at more than 200 physical stores in Hong Kong and enjoy shopping discounts in digital yuan by scanning QR codes at authorized stores.
Hong Kong has been establishing itself as a major offshore trade hub for the Chinese yuan, and in 2022 it became the first region outside of mainland China to test the usage of digital yuan across borders. In May 2023, the city also presented e-HKD, the CBDC pilot project for Hong Kong.
Another noteworthy experiment run by the Bank of China Hong Kong offered incentives for clients to create a BOC e-CNY wallet to obtain a bonus of $14 (100 yuan) redeemable at U Select, a supermarket chain.
Further highlighting the success of the digital yuan, Yi Gang, China’s central bank governor, recently stated that $250 billion has been transferred using the CBDC since the pilot program began 18 months ago. The CBDC, which had seen transactions amounting to 1.8 trillion yuan by the end of June, was discussed at the conference held in Singapore on July 19 to shed light on its development.
Meanwhile, China’s CBDC is currently being tested in at least 26 provinces and cities around the nation and is backed by two of the country’s biggest online payment systems, Alipay and WeChat Pay.
