China, despite its stern anti-crypto stance, is among the fastest growing examples of how big economies can experiment with CBDCs. The Bank of China is now testing an offline payment system which would work in integration with SIM cards. A new fintech tool, Central Bank Digital Currencies (CBDCs) are the blockchain representation of fiat currencies. Money transactions in CBDC would maintain unchangeable records, thus increasing the transparency in traditional financial systems.
The Bank of China has struck partnership deals with two national telcos — China Unicom and China Telecom — to facilitate these trials.
The lender will allow users to process e-CNY payments by having their SIM cards integrated with the government-backed CBDC app. Such SIM cards will be categorised as ‘super SIM cards’, loaded with near-field communication technologies.
When enabled, this offline payment system will only require the users to bring their phones close to the sale terminals and the payment via CBDC will be facilitated.
“The product will be launched in some pilot areas for invited user experience in the near future, and will be promoted to other pilot areas in stages. The launch of the product fully relies on the respective advantages of commercial banks and operators,” the Bank of China said in a statement.
Governments around the world are conducting research work around the feasilibility of introducing CBDCs in existing economies.
While CBDCs function like cryptocurrencies, they are regularised and issued by the central banks. Not only does this smoothen the online payment systems, but also reduces the dependency on cash notes.
China is among the largest nations in the world which is experimenting extensively with its CBDC initiative. Between 2020 and 2022, the country launched its e-CNY app to facilitate payments through its CBDC.
Around April 2022, China made its CBDC trials available in 23 cities including Shanghai, Beijing, and Shenzhen. Residents of this city were allowed, in fact encouraged, to pay for goods and services with the e-CNY, China-Briefing had said at the time.
In the most recent development, China’s Changshu city has decided to compensate all civil servants within its jurisdiction in the form of the CBDC.
