Foreign travelers to China will be able to use the digital yuan (e-CNY) without a local bank account, the People’s Bank of China (PBOC) announced.
“Foreign residents temporarily traveling in China can open an e-CNY wallet to meet daily payment needs without opening a domestic bank account,” PBOC said in a paper published on Friday (July 16) on its website.
However it is not clear when the bankless digital yuan feature will become available.
The central bank of the world’s second largest economy has has been working on developing a digital version of the yuan since 2014. In 2016 it established its Digital Currency Institute, which developed the first-generation prototype of the e-CNY. At the end of 2017, following the approval of the State Council, the PBOC began to work with commercial institutions in developing and testing the e-CNY.
The central bank carried out trials on the government-developed currency in about a dozen regions last year.
Since then, the PBOC has expanded its programme to include major banks, local and foreign retailers, digital apps, and the city of Hong Kong, a major offshore yuan centre.
As of last month, more than 20.87 million personal wallets and more than 3.51 million corporate wallets have been opened, with transaction value of about 34.5 billion yuan ($5.39 billion), according to the paper.
China is a front-runner in the global race to launch central bank digital currencies (CBDC) although the honor of being the first country to issue one went to the Bahamas last year.
The debate now heats up on whether the digital yuan will challenge the U.S. dollar for world prominence and shake up current financial systems.
many economies want to shake off reliance on the US dollar with the help of new technical methods, such as currency digitalization.
As Professor Luigi Zingales of the University of Chicago Booth School of Business told CGTN, every nation on Earth is basically subjected to U.S. legislation because their banking systems clear in the U.S. dollar.
“I think there is an increasing resentment in a lot of countries in the world, and they don’t want to be part of that. Especially when the decision taken by the U.S. tends to be volatile,” he said.
Some White House officials are also reportedly worried that the digital yuan threatens the U.S. dollar’s status as the dominant reserve currency.
Mobile pay has grown rapidly in the last several years to become the dominant form of payment in China. The country saw transactions worth $67 trillion being processed through mobile payments last year. The number was nearly 400 times more than that in the U.S., according to Chinese financial data provider Wind.
China is also exploring pilot schemes in using the digital currency for cross-border payments, the paper said. Pilots on cross-border payments will be based on respecting the monetary sovereignty of China and foreign countries complying with laws of countries involved, it added.
In April, PBOC deputy governor Li Bo insisted “our goal is not to replace the US dollar or any other international currency”.
China’s yuan makes up little more than 2% of world foreign exchange reserves compared with nearly 60% for the greenback.