From the Bank of England to the European Union, to the United States Federal Reserve, central banks are leaning towards utilizing a central bank digital currencies (CBDCs) model in managing their nations’ financial affairs. However, amid the growing list of countries developing a state-backed digital currency, China leads the global race with its DCEP.
Although the Chinese digital currency is yet to be fully rolled out, the country’s central bank, the People’s Bank of China (PBoC), had conducted a soft airdrop on the digital Renminbi to kick start the DCEP adoption process.
In this guide, we shall explore how to use the digital yuan.
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How the DCEP Works
The DCEP is a form of fiat money available in virtual form and stored in digital wallets. Its main goal is to enhance China’s payment system and potentially become an international currency that could rival the US dollar.
The digital RMB comes at a time when the world is quickly gravitating towards digital payments.
According to the scarce information available, the success of the DCEP is hooked on its adoption by users and merchants across China.
For example, merchants and token holders need to download a digital wallet on their mobile devices. Then, consumers load them up with money from their accounts held on commercial banks. Next, the funds in the application are available to make payments. The app is also needed to receive payments.
The Digital Yuan’s Airdrop, Who Benefited?
On October 9, 2020, news surfaced that Shenzhen would airdrop 10 million yuan in the form of the digital yuan. However, Asia Crypto Today previously reported that out of close to two million (1,913,800) people who applied to participate in the airdrop, only 50,000 were chosen. Each beneficiary received approximately 200 yuan. Registration to the lottery was done through a Shenzhen government-control decentralized platform called iShenzhen.
The coins’ distribution was dubbed “red packet” to symbolize the country’s gift packages/envelopes. However, the color of the envelopes was determined by the issuing commercial bank.
Packets emanating from the Agricultural Bank have a green color, and those from the Construction Bank are branded with the color blue. Envelopes from other participating banks such as Industrial, Bank of China, and Commercial Bank have red colors.
How to Access the Airdropped Digital Yuan
Note that the winners from the lottery received text messages with an app download link.
- Download and install the digital yuan mobile application using the link provided.
- Register and log in using the officially recognized mobile phone number.
- Receive free digital RMB worth 200 yuan, roughly 30 US dollars. The token is represented by an image similar to that of a physical 100 yuan bank note.
DCEP Adoption: How to use the Digital Yuan
With free digital yuan tokens, it’s time to spend it. Notably, those who received the free cons had to use them before they expire on October 18, 2020. For the early adopters of the DCEP, here’s how to go about the spending process.
Interestingly, supermarkets and shopping malls are increasingly coming into contact with the digital yuan as users rush to spend the tokens before their expiry date. Being a test run, symbols of where you can spend the digital RMB were minimally placed.
For example, in supermarkets, only a small sign was present at the cashier. In others, the POS configured to receive digital payments was only found at the customer service desk with the tag “BOC Smart Pay”. Note that when using the digital currency, spending more than the allocated amount requires a shopper to top up the balance using some other means, such as cash.
To use the coin for payments, the holder has to scan a merchant’s code using their digital yuan mobile application. The app has an identical user interface as that of Alipay.
When scanning, the app supports either a barcode or a QR code. Note that the merchant can scan the code from their customers, or the customers can scan their merchant’s code to activate payment. Interestingly, the app has a feature called ‘touch’ that eliminates the need for a connecting network, provided that the consumer’s and merchant’s mobile devices touch each other when initiating a payment.
Note that merchants have to click ‘slide to pay’ when they scan a consumer’s code. On the other hand, consumers have to click ‘scan code to pay’ when scanning the merchant’s payment code.
The adoption of the DCEP largely depends on ease-of-use. The PBoC has ensured a smooth user interface by mimicking interfaces of popular payment platforms in the country such as Alipay and WeChat Pay. However, with a possible full rollout of the digital yuan fast approaching, we might just be able to see its full potential.