China’s Central Bank Likely to Pilot Digital Currency in Cities of Shenzhen and Suzhou: Report

The People’s Bank of China is said to be preparing to launch pilots for its digital currency in at least two major cities.

As reported by Chinese financial news source Caijing on Monday, the central bank is “expected” to launch the tests of the fully digital yuan in Shenzhen and Suzhou. Other places may also see trials.

The tests are likely to include the participation of state-owned partners. These comprise the “Big Four” commercial banks – the Industrial and Commercial Bank of China, Bank of China, China Construction Bank and the Agricultural Bank of China – and three telcos, China Telecom, China Mobile and China Unicom.

The pilots will see the digital currency, dubbed digital currency electronic payment (DCEP), applied in real-world scenarios such as transportation, education and healthcare, Caijing says. Partner banks will be able to design their own trials scenarios for DCEP.

The first of two pilot phases will be smaller scale and start at the end of 2019. The second, later in 2020, will be a larger-scale effort in Shenzhen, according to the report. If all goes well, a full launch of DCEP is expected soon after the pilots.

The central bank has been hastening its efforts to develop DCEP in part due to the announcement of the Facebook-led Libra project in June. Libra would most likely be a stablecoin pegged to a basket of fiat currencies and government bonds, although other options may be on the table.

According to Caijing, DCEP would have some similarities to Libra, though the technical details are not spelled out. The report cites a PBoC official as having said that the digital currency is designed to replace physical cash in circulation (M0 in banking terminology), and will meet “the needs of portability and anonymity.”