The Chongqing district in China is to conduct a new pilot for the digital yuan central bank digital currency (CBDC). The pilot will allow taxpayers to make payments in digital yuan.
The digital yuan tax pilot is yet another experiment with the asset to take place in the country, which is rapidly testing its CBDC in different ways.
One company has already made tax payments using the digital yuan, making it the first taxpayer to do so. The Dekor Decoration Materials used the ICBC digital wallet to make a payment of 3,009 yuan.
Chongqing is one of three regions that were approved earlier this year for a larger experimental scope. The Municipal Taxation Bureau said that all taxpayers in the area can choose a pilot bank independently. They will be allowed to use online and mobile banking to pay taxes in the digital yuan, as well as social security premiums and some non-tax income collected by tax authorities.
The digital yuan has been subject to several pilots in the past few years which have met with a good response from the country’s citizens. However, one official from the country’s central bank said the digital yuan has had a negligible impact, so it may be a few years before the impact is noticeable.
Meanwhile, bitcoin and cryptocurrencies remain banned in the country, though one court ruled that bitcoin is protected under Chinese law. There has been no update since, and it seems unlikely that China will lift the crypto ban.
China marches on with CBDC use
China has made its CBDC development a priority on its long-term agenda. The sheer number of pilots and their scope is evidence of that. The country seems determined to implement the CBDC as broadly as possible.
China recently announced that it would airdrop digital yuan tokens to help boost local economies affected by lockdowns following surges in COVID-19 cases. More pilots will be conducted in the months to come, possibly leading to an official launch in the medium-term future.
The world has been keeping a close eye on China’s CBDC efforts. Most countries are developing their own CBDCs, and are keen to see how it may transform economies. However, not all are inspired by China’s approach, with Japan saying that it would look to Sweden’s CBDC for potential ideas.