China's central bank is revising a law to make way for issuing the country's digital currency, and the public will be able to exchange the new type of money only at certain qualified commercial banks, according to officials and analysts.
Nonbank payment service providers, such as Alipay and WeChat Pay, will not be allowed to provide digital currency exchange or cash deposit services, according to an official from the People's Bank of China, the central bank.
Alipay and WeChat Pay are part of the financial infrastructure and can be seen as the "wallets" of digital renminbi. The public can still use these electronic payment platforms for paying with digital currency, according to Mu Changchun, head of the PBOC's digital currency research institute.
Late on Friday, the PBOC disclosed a draft of the new central bank law on its website in order to gather public opinion. It said that "the renminbi has both physical and digital types", which would give the green light to issuance of digital renminbi. Meanwhile, the draft law forbids institutions or individuals from issuing any type of digitalized currency privately for circulation.
The central bank will maintain the centralized currency management system for digital renminbi and will be the only institution to determine the currency issuance amount and design and to issue regulations and technical and security standards. The PBOC is also in charge of the management of information related to digital renminbi, Mu said on the sidelines of the 2020 Bund Summit in Shanghai on Sunday.
The central bank will work with qualified operational institutions to jointly develop an ecosystem and platforms of digital currency wallets, the PBOC official added and clarified that some designated commercial banks are the only institutions where people can make exchanges involving digitalized currency.
"We are also developing new products of digital renminbi for older people and others who have been reluctant to use intelligent devices" like smartphones, Mu said.
Before the official issuance of the first digital renminbi, the PBOC has accelerated trials in some areas in retail sales.
Revising the central bank law confirmed that the digital renminbi will become legal tender, having the same legal position and protection of law as paper notes and coins.
On Monday, the central bank said on its WeChat account that PBOC Vice-Governor Fan Yifei awarded a cash prize, in digital renminbi, to winners of a fintech competition in Suzhou, Jiangsu province. Suzhou is one of the cities that have started digital currency trials.
"The latest signals have shown that digital renminbi is coming closer, and the trial may expand to more areas by the end of this year or the first half of next year," said Li Lihui, former president of Bank of China and head of the blockchain research working group at the National Internet Finance Association of China.
In an interview with China Daily, Li said revision of central bank law will provide the legal foundation for digital renminbi issuance.
The central bank has started a pilot program in Shenzhen's Luohu district, Guangdong province. It sent a total of 10 million yuan ($1.49 million) worth of digital currency to local residents for shopping, and some supermarkets, restaurants and retail service providers agreed to accept the new type of currency.
People who win a lucky drawing will receive the digital yuan in red gift packets through downloading an app on their mobile phones.