In the race of the central bank digital currencies (CBDCs), China has been leaving no stone unturned on its end. Now, the Bank of China (BoC), one of the largest state-owned banks in China, has its plan on track to enable citizens to use the offline version of its CBDC.
According to local media reports, the BoC plans to enable users to make phone payments by integrating its digital Yuan app with specialized “super SIM cards” with near-field communication capabilities. Notably, the bank is currently conducting trials for an offline payment system that connects to SIM cards.
This payment method is designed specifically for facilitating the use of an offline version of digital Yuan i.e. China’s CBDC. Notably, the recent announcement comes in partnership with telecommunication operators China Telecom and China Unicom.
Additionally, the partnership and the overall project aims to be done at the earliest and expressed bank’s intention to commence testing the next day.
As per the bank’s announcement, in order to make the payments, users simply need to bring their mobile phones near the point of sale terminals for payment, eradicating the need to turn the phone on. The biggest highlight about the system is that the integration would allow transactions to be processed even when the phone is powered off.
However, as of now, the bank has stated that these SIM card payment functions will only be accessible on specific smartphones in a few select regions of China. Recently, China has been expanding ways to maximise the accessibility of an offline CBDC to enhance inclusivity among the rural and elderly population and to bridge the digital divide.
In recent news, upon the interest of Chinese ministry, state-owned banks are set to lead efforts to integrate digital Yuan with government-issued social security cards.
Similarly, to enhance the adoption of CBDCs, Jinan, capital of Shandong Province, all of its bus routes to accept payments in the form of the CBDCs. To do so, passengers simply need to download the digital yuan app, deposit funds and scan the QR code in the bus payment section to pay for their ride.
After the Chinese central bank launched a trial version of the digital Yuan app in 2022, the nation included digital Yuan in its Belt and Road Initiative and cross-border trades. These moves aim to increase CBDC adoption and extend digital Yuan usage to pay taxes and utility services in the country. Along with other ways like giveaways etc., Changshu, a city in Jiangsu Province, has announced that salary to civil servants will be paid in digital RMB or digital yuan from May 2023.
Keeping up with the trend in the case of digital payments and online shopping, Changsha, another Chinese city, more than 420,000 merchants are accepting payments in the digital Yuan. Additionally, WeChat Pay, a popular Chinese mobile payment and digital wallet service added digital Yuan for fostering digital payments and in large the CBDC adoption.
China’s efforts towards CBDC signify nation’s aim to lead the race and make it accessible for the largest possible crowd. As the developing nations including India also struggle with the issue of digital divide, China’s step comes as a significant move. Notably, Indian central bank is also working on ways to bring an offline CBDC. Hence, the results of the Chinese offline CBDC is going to be a dynamic step in the overall CBDC journey.