Continuing on with its central bank digital currency (CBDC) trials, China is handing out $6.2 million worth of its digital yuan to Beijing residents in a lottery.
Beijing residents can apply for the 40 million renminbi through a pair of banking apps, according to the Beijing Local Financial Supervision and Administration Bureau. Applicants could receive one of 200,000 so-called “red packets” that contain 200 renminbi each. Winners can spend the digital currency with selected merchants.
This lottery is another trial for the digital yuan, however, China has yet to initiate a nationwide distribution of the digital currency.
Digital yuan trials
While the development of its CBDC began in 2014, trials with the digital yuan have been ongoing since last year. For instance, other cities such as the Chinese technology hub of Shenzhen held their own lotteries last year. Additionally, the southwestern Chinese city of Chengdu handed out 40.2 million yuan worth of digital yuan currency earlier this year.
Deputy governor of the People’s Bank of China, Li Bo said it would expand the scope of its pilot projects. He even said the PBoC might allow foreign visitors to use it at the 2022 Beijing Winter Olympics. Li emphasized that the digital yuan was for domestic use, not an attempt to challenge the dominance of the U.S. dollar:
“For the internationalization of the renminbi, we have said many times that it’s a natural process and our goal is not to replace (the) U.S. dollar or any other international currency,” Li said. “I think our goal is to allow the market to choose and to facilitate international trade and investment.”
Despite this declaration, Western observers are still wary. Earlier this year, it was reported that the incoming Biden administration was keeping tabs on the digital yuan’s development. U.S. authorities were concerned about its distribution method and its use as a tool to sidestep sanctions. Although many are brushing off the digital yuan’s immediate potential to displace the dollar, U.S. authorities are still concerned it could affect the dollar’s position in the long run.
Crypto crackdown in China
Meanwhile, as China continues development with its own digital currency, it has stymied the proliferation of cryptocurrencies within its borders. While local cryptocurrency exchanges were banned in 2017, last month, banks and online payment channels were banned from offering clients any services involving cryptocurrency.
However, given the decentralized cross-border nature of cryptocurrencies, this has proven difficult to enforce. Chinese crypto enthusiasts reportedly continue to trade using over-the-counter (OTC) platforms and decentralized exchanges (DEX).