Winton Dong dht0620@126.com RESIDENTS in Suzhou, Jiangsu Province, are now piloting a program of the digital renminbi issued by the People’s Bank of China, the country’s central bank. Unlike Shenzhen residents who took part in a similar program in October this year in which they had to spend offline the digital money offered by the local government, people in Suzhou can use the virtual money to purchase goods not only in designated brick-and-mortar stores, but also via the official app of online retailer JD. Some users in Suzhou are even allowed to try the newly developed “offline wallet” function, which means transactions could be done without the Internet or being linked to a bank account as required by the popular Alipay and WeChat Pay. The offline wallet is a special facility or app installed in mobile phones and other terminal devices. If there is no Internet connection or the network signal is weak, users don’t have to transfer money through the system linked to bank accounts. Instead they simply confirm the transaction information and make payments through the offline wallet, because it supports near-field communication (NFC), a technology that allows users to transfer money simply by touching their mobile phones together or placing the smartphone close to the point-of-sale device. Compared with traditional bank notes and coins, the digital currency has many advantages. Firstly, the central bank’s trial of the digital currency shows the Chinese Government supports the development of the new payment mechanism. As a new type of legal negotiable instrument, the digital currency signifies the upgrading of our existing financial system and the guarantee of State credit. Secondly, the digital yuan is an important part of China’s bid to internationalize its currency. It will help make our payments and settlements more efficient and convenient since cross-border trade activities with foreign partners will no longer have to rely on a third-party currency to finish transactions. Thirdly, a digital currency could help cut the high costs of printing and distributing traditional paper notes. Because of its traceability, the digital renminbi can also make transactions more transparent by preventing illegal activities such as money laundering, tax evasion and terrorism financing. Fourthly, the digital currency will promote China’s financial market construction. It will help financial experts make a thorough analysis of the currency using big data, which will be a key resource for decision-makers and the implementation of monetary policy. Moreover, a two-tier operation system will be introduced to manage China’s digital currency, with the central bank as the upper tier and other banks and financial institutions forming the lower tier. Thus, the launching of the digital currency will facilitate the ability of commercial banks and other financial institutions to make innovations in fields such as digital credit and loans, digital assets and debt management. In spite of its fast development, the digital yuan is still in its initial stage. Rapid development of digital currency does not mean the advent of a cashless society. At present, cash is still the most basic means of payment in China. For the long term, bank notes and coins, electronic payment platforms and the central bank’s digital currency will coexist. It is obvious that the novel coronavirus pandemic has further accelerated the development of cashless and mobile payments. In order to reduce face-to-face contact, rejections of paper bank notes and coins have recently increased in China. However, some groups, especially the elderly and mentally retarded people, are facing difficulties since they lack or are not familiar with cashless payment methods. Banking authorities should take measures to protect the right of these people and investigate institutions and individuals who refuse to accept bank notes and coins. Moreover, cybersecurity and personal privacy, among other technical and social issues, remain major concerns for possible digital currency users. When these issues are resolved, it will be the right time for the digital yuan to move to center stage in China. (The author is the editor-in-chief of Shenzhen Daily with a Ph.D. from the Journalism and Communication School of Wuhan University.) | 