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China will expand the trial of its sovereign digital currency to a number of Chinese cities including Chongqing, Tianjin, Hangzhou and Guangzhou, as the central bank works on incentives for banks, technology firms and local authorities to take part in its e-CNY.
The decision was made at a People's Bank of China (PBOC) meeting on March 31, according to a statement published by the central bank on Saturday. It is the PBOC's first-ever symposium on digital currency, where the central bank's governor Yi Gang spoke, in a sign of escalated support for the digital yuan.
The programme will cover Fuzhou and Xiamen in Fujian province, and five cities in Zhejiang province that will host the 2022 Asian Games, namely Ningbo, Wenzhou, Shaoxing, Jinhua and Huzhou.
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China's e-CNY experiment, which generally involved giving cash reward to consumers to spur usage and asking merchants to accept e-CNY payments, have demonstrated the initial feasibility of the digital sovereign currency, but additional research and exploration are needed in security, compliance and potential impact on the existing banking system, the central bank said.
"Policies must be designed to stimulate creativity and enthusiasm among the banks, technology firms and the local government in the development, promotion and proliferation of the digital yuan," the central bank said. "In the process of promotion, competition should be encouraged."
China's active roll-out of its sovereign digital currency has moved ahead of other major central banks like the US Federal Reserve and the Bank of Japan, raising suspicion as to the Chinese government's intent. Robert Greene, a former senior adviser to the US Treasury, published an article last July saying one potential function of the e-CNY may be to skirt US financial sanctions.
To be sure, the Chinese central bank's summary of the symposium didn't mention cross-border use of the digital currency, mostly focusing the discussion on domestic usage. The e-CNY is a digital for of the Chinese central bank's fiat money, which is not freely convertible outside China.
China's digital yuan experiments have already taken place in Beijing, Shenzhen, Shanghai, Suzhou, Xiong'an, Chengdu, Hainan, Changsha, Xi'an, Qingdao and Dalian. According to the latest data from the central bank, the e-CNY had 261 million users at the end of 2021, nearly double the user number in October.