In a bid towards becoming a cashless society, China recently gave away millions in digital yuan in a lottery-style campaign. Held in the southern technology hub of China Shenzhen, almost two million people signed up for the giveaway through the government-operated blockchain-based public services app called iShenzen. However, only around 2.5% or 50,000 people were successful in receiving the free digital money.
The successful participants each received 200 yuan in digital ‘red packets’, which are traditionally given out during special occasions. The winners can spend their digital money at the 3389 stores designated specifically to receive the electronic payment. The money cannot be used elsewhere or transferred into regular bank accounts.
This giveaway is part of China’s latest plan to test its technology and acceptance of the digital currency. However, one concern raised by many is how children and elderly can be a part of the campaign since it requires owning a digital wallet via the official Digital Renminbi App. It is not available for public download. A link was sent to just the winners to claim and use their digital currency.
The digital yuan is officially known as the Digital Currency Electronic Payment (DCEP). It is aimed to be the digital version of the currency of China and hence, is issued by the People’s Bank of China, the country’s central bank. This backing by the POBC is what makes DCEP different from bitcoin or other such cryptocurrencies.
According to the chief economist at China’s Hang Seng Bank, Dan Wang the advantage of this giveaway to offshoot the use of DCEP is that it is likely to create a multiplier effect, i.e. more sales will be generated with the spend of each digital yuan. Another advantage he mentioned is that the regulators will have clear data on where the digital currency is being spent. It will help to create targeted economic stimulus programmes.
“A back-of-the-envelope calculation would suggest that this 10-million-yuan programme will generate at least 50 million yuan in total demand,” he added.
The country has been holding a series of pilot programmes across China in the past year for using the DCEP. In fact, the digital currency has been used for 1.1billion yuan worth of transactions during this time. According to PBOC, local giants like the Ant Group and Tencent as well as international companies like Starbucks and Subway are also taking part in these pilot programmes.
The Shenzhen government is introducing various creative ways to use DCEP. During the pandemic around 5,000 health and medical workers were rewarded with digital yuan by the Shenzhen government and according to the Nikkei Asia Review, the DCEP users will also be able us certain vending machines to buy collectable capsule toys.
As per a report by AsiaOne, an unidentified winner of the giveaway said that DCEP is a ‘litmus test’ for the ‘new economy’ and they believe that once the country succeeds in making its application widely accepted, it will severely attack and unseat the US dollar’s role as the dominant global reserve currency.
Although PBOC has said that there is no official timetable yet for launching DCEP, the aggressive tests suggest it cannot be too long now. People of China sure seem excited about this new development, as to how it affects the world economy, that is yet to be seen.
Sources: Coindesk, AsiaOne, South China Morning Post
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