The People’s Bank of China or PBoC is a financial entity that has been at the center of the very delicate cryptocurrency-related space. That space is the point of contact between crypto and fiat currencies in the country that provides the biggest hash rate of the bitcoin network. Without China, the current setup and usage of the BTC token simply would not be possible. Because of that, for years, the PBoC has stood as a form of gatekeeper for many crypto ventures in China but also, by proxy, for almost any major cryptocurrency-connected entity anywhere in the world.
Here, most experts and industry insiders tried to keep tabs on the possible regulatory pushes and any potential clampdowns in China organized by the PBoC. These events always have and continue to have the power to take down the price and market cap of any cryptocurrency in the world, so their relevance is undisputed.
Yet, at the same time, the PBoC has been working diligently on its own cryptocurrency project. This venture has the purpose of figuring out the feasibility and usefulness of having digital yuan. Now, after several years in these undertakings, the bank has revealed some data about the current state of the project. Expectedly, the insight is not huge, but it shows what can only be described as a very successful start of the yuan digitalization.
First Test Results
While it was no secret that the project of the Chinese digital currency is underway, actual official info about the same venture remained very scarce. For many, this was completely in line with the wider context of the Beijing government, especially in regard to macroeconomic policy. But, recently, that changed with a high ranking Chinese official coming out with some information on the same project. The governor of PBoC recently announced that the digital yuan successfully tested its digital currency. That took place on Monday in Hong Kong during the Fintech Week conference that is taking place there.
The official from the PBoC in question is Yi Gang, the governor of the same national bank. He said that the pilot program is not connecting financially, through the digital platform and what is assumed to be a blockchain-based token, in a number of cities. These are all located on the Chinese mainland. Now, Gang said that the network took across over 2 billion yuan, which adds up to about 300 million USD. The same took place through 4 million individual transactions. When that is calculated on the value of an individual transaction, the average transfer of money through the digital yuan was around 75 USD.
Support for Remote Areas
Gang also explained that the range of financial services in different remote areas of China did much to bolster the use of new technologies, especially fintech. The same, in turn, provided a range of benefits to the same regions, especially using things like risk management and micro loans. Here, the fact that much of so-called outer China, as well as other poor and underdeveloped regions, have limited access to traditional banking and financial services is also relevant. A farmer in a rural part of a distant Chinese region will have a tough time getting to a bank, let alone reaching one that would provide him with a loan.
What is more, a big part of the rural population simply does not have access to any traditional banking service. This includes the most mundane things like bank accounts using the domestic currency Yet, digital services and fintech offer just that. Now, more and more people, as well as business ventures, are using them to cover their needs, instead of trying and failing to do it through traditional banking. All of these services come into play as a unified force connecting banks and businesses, but also regular individuals as the spread of digital yuan continues in China.
The COVID-19 coronavirus pandemic hit China first among all of the countries that are now in the midst of the same crisis. However, the same pandemic spread was quickly contained in the country, limiting to the outbreak in Wuhan, where it began at the end of 2019. But, the challenges of the pandemic are still impacting citizens of China. The period showed that needs for things like contactless banking, online shopping, and many services that were previously simply a matter of convenience suddenly now became an essential element of consumer health and safety.
What was once the domain of esports players, tech fanatics and other relatively small groups is becoming something that is a widespread part of the financial user experience. Now, this is an element that central banks cannot ignore and thus it is spreading further in the traditional financial system. An additional factor lies in the semi-permanent nature of the present pandemic – the hopes for a swift end to the problem began fading very fast during the last summer. All of that pressure from the pandemic is accelerating all fintech development. Digital yuan is not an exception and the PBoC officials are even willing to publicly share the safe trajectory of future development.
Transparency without Dates
While the PBoC governor was refreshingly transparent about many aspects of the digital yuan development process, he still remained ambiguous about some key issues. The main one among them was the prospect of the launch of this service. Clearly, China needs it, including millions of mainland citizens who would greatly benefit from it. Also, in the world where all forms of digital currency use, especially that of bitcoin’s BTC token is going up, the same needs will continue to grow for digital yuan as well. But PBoC does not know when this service will be ready for public use.
Gang believes that the project remains presently in its early stages, despite the massive present success. The bulk of future work will not take place on the development front necessarily. Instead, a complicated legal framework needs to be in place to support the launch of digital yuan. The problem is that this framework needs to be both comprehensive and applicable for the end-users. That process will surely take years before it is ready for its full public launch.