China's Suzhou to issue 20 million digital yuan in pilot program

A pilot program to promote the adoption of digital currency via 20 million yuan ($3.06 million) worth of hongbaos or "red envelopes" was launched in east China's Suzhou City on Saturday.

Coinciding with another Chinese online shopping festival, Double 12, the municipal government and the People's Bank of China (PBOC) will issue 100,000 "red envelopes" worth 200 yuan each to consumers selected through a lottery.

Suzhou's scheme is the second such digital lottery. The PBOC issued 10 million yuan worth of digital currency to 50,000 randomly selected consumers in the southern city of Shenzhen in October.

JD Digits, Chinese e-commerce giant JD.com's fintech arm, will accept digital yuan as payment for some products on its online mall as part of an experimental giveaway of digital yuan to citizens of Suzhou, according to a post on the company's official WeChat account. This will make JD.com the first online platform to accept China's digital currency.

From 8 p.m. on December 11 to midnight on December 27, these "red envelopes" will be accepted as payment for some products on JD.com's online mall besides the designated offline stores in Suzhou, said JD.com's WeChat post.

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, but it will be designed to handle transactions more quickly, making it feasible for wider adoption in China.

In late October, the PBOC included the digital yuan in the latest version of a proposed banking law, providing more legal ground to the regulation of its electronic currency that is now in the testing stage.

The proposed law recognizes the national currency, the renminbi, in both physical and digital form, with particular clarity on the digital yuan to be the one and only official yuan-pegged token in China to "prevent the risk of virtual currency." The draft also clarifies the digital currency as legal tender, laying down grounds for its wider issuance.

(Cover via CFP)