China, despite its strict stance on cryptocurrency, is a prime example of how large economies can experiment with Central Bank Digital Currencies (CBDCs) and experience rapid growth. The Bank of China is currently testing an innovative offline payment system that integrates with SIM cards. CBDCs are blockchain representations of fiat currencies that ensure transparent and immutable financial transactions.
To facilitate these trials, the Bank of China has partnered with two national telecommunications companies, China Unicom and China Telecom. Users will be able to process e-CNY payments by integrating their SIM cards with the government-backed CBDC app. These SIM cards, known as “super SIM cards,” will be equipped with near-field communication technologies.
Once enabled, this offline payment system will only require users to bring their phones near the sales terminals for CBDC payments to be conducted seamlessly.
“The product will be launched in select pilot areas for invited users to gain firsthand experience, and will subsequently be rolled out to other pilot areas. The launch of the product is contingent upon the combined strengths of commercial banks and operators,” stated the Bank of China in a recent announcement.
Governments worldwide are currently researching the feasibility of introducing CBDCs into their economies. While CBDCs function similarly to cryptocurrencies, they are regulated and issued by central banks. This not only enhances online payment systems but also reduces reliance on physical cash.
China stands out as one of the leading nations extensively experimenting with its CBDC initiative. From 2020 to 2022, the country launched its e-CNY app, allowing payments through its CBDC. By April 2022, China extended its CBDC trials to 23 cities, including Shanghai, Beijing, and Shenzhen. During this time, residents were encouraged to use e-CNY for purchasing goods and services, as reported by China-Briefing.
In the latest development, Changshu city in China has decided to compensate all civil servants within its jurisdiction using the CBDC.
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