The test of the Bank of China’s secret digital currency has caused great curiosity among Chinese citizens. Recently, the bank responded with an official explanation of the proposed digital Yuan and how it works.
A bank representative confirmed on China Central Television on April 19 that trials of a new digital currency (also referred to as DC/EP, for “digital currency/electronic payment”) have been carried out in the cities of Shenzhen, Suzhou, Xiongan new area, Chengdu, and the site of the future winter Olympics.
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But the researcher stresses that the current test does not imply that the digital Yuan has been officially released for public use. The representative added:
“The current digital Yuan closed test will not affect the commercial operations of the listed institutions, nor will it affect the RMB issuance and circulation system, financial market and social economy outside the test environment. ”
To ensure that the central bank’s digital currency is not oversold, commercial institutions will pay out a 100% reserve to the central bank, the agency said. In other words, at the time of issuance, the People’s Bank of China will first exchange the digital currency with other banks or operating agents. These agencies will then release the digital currency into public circulation.
Technical design and main characteristics
The bank has completed the top layer design, with the digital currency adopting a two-tier architecture and a two-tier remittance system.
If the payment function of online banking and payment platforms is down due to poor network signal, DC/EP dual offline technology will ensure that digital Yuan will work as effectively as paper Yuan. Banks explain:
“In the absence of a network, as long as two mobile phones equipped with a DC/EP digital wallet are touched. The transfer or payment function can be realized.”
According to the bank, the Chinese version of the digital currency is not tied to any bank accounts. They further claim that it is free from the control of the traditional banking system.
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Unlike other cryptocurrencies, the digital Yuan is launched by the Chinese central bank and is therefore backed by state credit. It is similar to the electronic version of the renminbi. The bank says that, compared to Bitcoin, this new digital currency will have greater inherent stability.
As Cointelegraph previously reported, China’s central bank digital currency is being tested as part of a transportation subsidy scheme for local governments and corporate workers.