Despite its strict stance on cryptocurrencies, China has emerged as one of the leading countries experimenting with Central Bank Digital Currencies (CBDCs). The Bank of China is currently conducting tests on an offline payment system that integrates with SIM cards, in partnership with national telecommunications companies China Unicom and China Telecom. CBDCs are blockchain representations of fiat currencies that aim to increase transparency in traditional financial systems by maintaining immutable transaction records.
Super SIM Cards and Offline Payments
The Bank of China plans to offer users the ability to make 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. With this offline payment system enabled, users will only need to bring their phones close to sale terminals for CBDC payments to be facilitated.
Launch and Pilot Areas
The Bank of China has stated that the product will initially be launched in selected pilot areas to provide an invited user experience. It will then be gradually promoted to other pilot areas. The successful launch of the product relies on leveraging the advantages of commercial banks and telecommunication operators, according to the Bank of China’s statement.
Global CBDC Research and Advantages
Governments worldwide are actively researching the feasibility of introducing CBDCs into existing economies. While CBDCs share some similarities with cryptocurrencies, they are regulated and issued by central banks. This not only enhances online payment systems but also reduces reliance on cash notes.
China’s Extensive CBDC Initiatives
China is at the forefront of CBDC experimentation, with extensive initiatives already underway. The country introduced its e-CNY app between 2020 and 2022 to facilitate payments using the CBDC. In April 2022, CBDC trials were made available in 23 cities, including Shanghai, Beijing, and Shenzhen. Residents were encouraged to utilize the e-CNY for various transactions. In a recent development, the city of Changshu has decided to compensate all civil servants within its jurisdiction using the CBDC.
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Conclusion
China’s Bank of China is pushing the boundaries of CBDC implementation by testing an offline payment system integrated with SIM cards. This innovative approach aims to enhance the convenience and efficiency of CBDC transactions. As China continues its extensive CBDC initiatives, the country serves as a notable example of how major economies can explore and experiment with digital currencies issued by central banks.
