E-CNY signals digitalization to 'connect everything'

Updated: Mar 22, 2021 By Cheng Shi and Gao Xinhong China Daily Global Print
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The 2021 Government Work Report mentioned the word "digital" 10 times, which is unprecedented. It means that building a "digital China" has become an important goal of the country's long-term plan for economic development.

In order to create new advantages in the digitalized economy, China needs not only to focus on the improvement of digital productivity, but also to promote the overall evolution of production relations. In this context, the innovation of the currency system is the starting point for a series of changes.

Since the implementation of the first pilot application scenario of the digital renminbi, or e-CNY, in April 2020, the speed and breadth of the promotion have greatly exceeded the market expectation, and a total of 150 million yuan ($23 million) of e-CNY has been distributed to the public.

We believe that so far the development of e-CNY has been in a "sprint stage", and it will accelerate the construction of a digitalized China.

The e-CNY has become a hot word at the two sessions this year, and has been included in the targets of many local governments' annual tasks.

The tests relating to the 2022 Beijing Winter Olympics scenes were laid out in advance in February, and to some extent, the "closed-loop test" so far has met the requirements set before, and the official launch of the digital currency may be coming soon.

For storing the e-CNY, safety and portability are the primary elements to consider. The physical form of e-CNY will be as simple and pragmatic as possible, and it will be promoted at full speed in a direction that is in line with China's rational development of the financial sector.

The visual card, wearable device, and digital wallet with chips, may only be used as supplements for specific scenarios.

Recently, the Digital Research Institute of the People's Bank of China, the central bank, has accelerated the development of the enterprise application of e-CNY. It is based on China's first autonomous and controllable blockchain software and hardware technology system called "Chang'an Chain".

The system shows that the functions of the digital RMB will not only replace M0-the cash in circulation-but also aim to serve the mutual-trust payment and improve the environment of enterprises.

Looking forward, the full range of traceability of the e-CNY is coupled with the blockchain technology, and its programmability expands the space for applications of digital technologies, such as 5G and artificial intelligence, or it will reconstruct the exchange system of the global digitalized economy. It may spark a new generation of digital economy.

The test of e-CNY is paving related financial infrastructure both online and offline. In April 2020, China's first application scenario of the e-CNY debuted in Suzhou, Jiangsu province and it was distributed to employees of district-level government agencies, institutions and directly affiliated enterprises in Xiangcheng district in the form of transportation subsidies.

After six years of research and development, the e-CNY finally entered the stage of promotion to residents.

Since the first pilot program of the e-CNY digital red packets in Shenzhen's Luohu district, Guangdong, in October 2020, the central bank has distributed 150 million yuan in all in red packets in Beijing, Suzhou, Chengdu in Sichuan province, Shenzhen's Futian and Longhua districts.

We believe that the promotion of e-CNY is a gradual and inclusive process. Not only does it promote citizens' participation during the issuance of the "red envelopes", it also considers the users' needs of the circulation of digital money.

On the one hand, the promotion of e-CNY has gradually moved from purely offline scenarios, such as gas stations and supermarkets, to the integration of online and offline.

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