The digital yuan (pilot) app is now listed on Android and Apple app stores, covering shopping, transport, finance and bill-payment scenes. Behind the popular wallet, the information and communications industry is applying its technology strengths to help the digital yuan land widely and support the digital economy.
Cash that lives in your phone
The digital yuan is simply the electronic form of the yuan – not a string of digits in a bank account but currency with denomination and quantity, payable in instalments. In application terms, it is cash living in your phone, settling payments both online and offline.
Developing it matters for the digital economy: an official digital currency efficiently meets public demand for legal tender in digital conditions, improves the convenience, security and anti-counterfeiting of retail payments, and supports digital economic growth. Jiang Qiping of the Chinese Academy of Social Sciences said the conditions are in place; what remains is the technical shift of exchanging digital tokens from physical to purely digital form. Shi Guang of the Development Research Center of the State Council framed it as adapting the yuan to the internet era – from physical form to electronic currency circulating on networks.
Wang Lixin, a professor at Beijing University of Posts and Telecommunications, summarised the advantages: state issuance means any merchant must accept it; offline payment needs no network; user information is not sent back to service providers, protecting privacy; controllable anonymity lets illegal transactions be traced; no bank account needed – greener, safer and cheaper; central-bank money carries full credit; big data analysis helps avoid over-issuance; and it supports the yuan’s internationalisation.
Dual offline payment via NFC
How does it differ from Alipay and WeChat Pay? Mu Changchun, director of the PBoC’s Digital Currency Research Institute, and Ant Group CEO Hu Xiaoming have both explained it the same way: mobile payment wallets are financial infrastructure, while the digital yuan is a payment tool – the content of the wallet. Alipay and WeChat digitise banknotes; the digital yuan replaces them.
Internet and card payments bind tightly to bank accounts, so they cannot meet anonymity needs and cannot fully replace cash. The digital yuan needs no bank account, keeping cash’s properties while adding portability and controllable anonymity.
Its signature technical feature is dual offline payment: both parties can complete a transaction with neither connected to a network, using near-field communication (NFC) – an inductive reader and card plus point-to-point exchange let phones ‘tap’ to pay. It therefore complements rather than replaces existing mobile payments, adding a new universal payment method that will coexist with traditional electronic payment tools for the long term.
Telecom operators moved early
Digital yuan tokens can live in an app or in a SIM card. Two main operating models exist – bank-led wallets, and operator wallets combined with SIM cards – and the three big carriers have joined the central bank’s pilots. They hold multiple digital-currency patents, work with operating institutions on application scenes, push dual offline payment through SIM hard wallets, and develop IoT yuan modules embedded in connected devices.
The milestones: February 2021, the first SIM card supporting a digital yuan hard wallet appeared in a Suzhou Mobile hall; July, China Mobile’s SIMPY hard wallet began trial commercial use; October, China Mobile and ICBC launched the SIMPAY brand. China Telecom activated digital yuan payment across 1,600-plus Suzhou service halls early in 2021, launched a joint wallet with Bank of China in September, and built a 5G-SIM hard wallet with online and offline payment modes via NFC or QR code. China Unicom and Bank of China launched a SIM-card wallet in March, and for the Winter Olympics Unicom deployed vending machines, unmanned stores and licensed-goods machines plus payment gloves, badges and garments.
Equipment makers are in too: Huawei helped define the hardware wallet specification and shipped the first smartphone with a built-in digital yuan hardware wallet in its Mate 40 series, performing wallet computation and encrypted storage on the chip with high-performance NFC.
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