China's digital currency usage has advanced again as 50,000 randomly selected citizens in South China's Shenzhen received a total of 10 million yuan ($1.5 million) worth of digital currency in a digital lottery that culminated on October 12.
The lucky draw took place a day after the second-largest economy in the world announced its plan to build Shenzhen, dubbed China's Silicon Valley, into a pilot demonstration zone for socialism with Chinese characteristics. It means more reforms and opening-up for the country, and promoting the Digital Currency Electronic Payment (DCEP) is one of the plans.
According to the Shenzhen municipal government, over 19.3 million people participated in the digital currency lucky draw. Each lucky winner received 200 yuan to spend at any one of the over 3,000 selected retail outlets in the tech hub. In terms of users and money scale, the lucky draw was the biggest move since China's central bank kicked off the pilot for the DCEP project in a couple of cities in April. The country's commerce ministry said the new money would also be tested in some scenarios during the 2022 Winter Olympics Games in Beijing and expanded to other regions as necessary.
China has been a relatively cashless society for years, with millions of mobile payment users paying with either Tencent's WeChat Pay or Alibaba's Alipay every day. Per the People's Bank of China (PBOC), banks in China handled non-cash mobile payments of $49.27 trillion in 2019, more than 25 percent from the previous year.
So, why is China pushing for a digital currency, and how is it different from other electronic payment options?
A regular consumer transaction with a digital currency would be pretty similar to an online payment transaction with Alipay or WeChat Pay. Using those electronic payment tools, one has to have a bank account with money in it, from which funds are deducted when they pay through apps. Users are not out of the traditional banking system. However, with digital currency, one does not need to have paper banknotes in a bank account somewhere. The digital currency is deposited directly into your electronic bank wallet.
Digital currency is digitally created. It is still cash, but another type of cash. Imagine yourself living in a virtual world or a video game; digital currency is just like the coins you earn and spend in the game. It has real monetary value; you just can't touch it.
China's digital currency is issued by the central bank, which makes it totally different from cryptocurrencies like bitcoin and Facebook Inc's Libra. Since all currencies issued by the central bank are debt, the nation will use its power to guarantee the digital currency's repayment for credibility.
According to the PBOC, the digital currency currently being tested shares features with cryptocurrencies, like bitcoin and Facebook Inc's Libra, but it will be designed to handle transactions more quickly, making it feasible for wider adoption in China.
Professor Jeffrey Towson, the host of Jeff's Asia Tech Class, once commented on CGTN's Dialogue that using a central bank-backed digital currency is a bit more efficient for consumers since it doesn't require the intermediate step to link their bank accounts with online payment systems. He also said it's more significant on the government's side because it allows the government to have more visibility in real-time transactions and bypass the Western banking system when making transactions outside of China.
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