On July 8, 2020, China’s ride-sharing juggernaut Didi Chuxing announced plans to trial the country’s central bank digital currency (CBDC) developed by the People’s Bank of China’s (PBOC’s).
DiDi revealed it had inked a deal with PBoC Research Institute to test the e-Yuan officially known as Digital Currency Electronic Payment (DC/EP).
Together, DiDi and the PBoC’s research institute will deploy a strategy to bring the DC/EP solution to China’s large-scale transportation network, which DiDi hails as “the world’s largest one-stop on-demand transportation platform.”
While precise specifics of the DiDi-Yuan pilot aren’t clear, the project can be the pioneering real-world application of DCEP, given DiDi’s enormous user base.
DiDi already supports Alipay and WeChat Pay on its platform, so venturing into the e-Yuan payment system seems to be a promising proposition.
China’s e-Yuan Launch on Track
China started developing its virtual currency in 2014 and has recently entered into the testing phase. The PBOC has collaborated with seven state-owned entities, including four banks and three telecom giants, to test the e-Yuan.
Moreover, Chinese officials recently announced that McDonald’s and Starbucks are among a group of prominent retail startups that have joined a trial of China’s e-Yuan, as part of a pilot phase before a more extensive launch of the virtual currency.
The two companies joined other retail startups and eateries such as Subway and JD Supermarkets in the pilot, which is scheduled to occur in the city of Xiong’An.
According to the latest reports from Chinese officials, the e-Yuan’s development is approaching the final phases.
In late June, the former vice-chair of the central bank’s National Council for Social Security Fund, Wang Zhongmin, revealed that the final architecture development of China’s CBDC had been completed.
However, there is still no official launch date for the CDBC despite the pilot test being carried out in various locations, including Shenzhen, Suzhou, and Xiongan.
How will the e-Yuan Work?
The Chinese CBDC is more than just another mobile payment platform, as it aims to replace a portion of the fiat supply in the Chinese monetary system.
China’s DC/EP will be deployed in a two-tiered system. The first tier is between the PBoC and the commercial banks and Alipay and WeChat Pay. Through this extensive layer, the PBoC will distribute CBDC to banks, after which these banks can then channel the digital cash via a second tier to retail clients via digital wallets. However, the e-Yuan isn’t decentralized, as all decision-making authority is fully allocated to the PBoC.