China launches CBDC payments in offline trials, implements e-CNY payments to SIMs
The offline payment system in China will enable users to make CBDC payments by bringing their phones close to sale terminals, thereby eliminating the need for an internet connection.
Highlights
- The Bank of China has partnered with China Unicom and China Telecom
- CBDC payments integrate with SIM cards for offline transactions
- These SIM cards called 'super SIM cards’ will be equipped with NFC technology
The Bank of China has initiated offline trials of its Central Bank Digital Currency (CBDC) payment system, integrating it with SIM cards. This development indicates that China is continuing its experimentation with CBDCs despite its strict stance on cryptocurrencies.
CBDCs are digital representations of fiat currencies that leverage blockchain technology. One of the key advantages of CBDCs is that transactions conducted using them can be recorded on an immutable ledger that cannot be modified, thereby increasing transparency within traditional financial systems.
CBDC for e-CNY payments
In order to facilitate these trials, the Bank of China has partnered with two national telecommunications companies, China Unicom and China Telecom. Users participating in the trials will be able to conduct e-CNY (electronic Chinese Yuan) payments by integrating their SIM cards with the government-backed CBDC application. These SIM cards, referred to as 'super SIM cards,' will be equipped with near-field communication (NFC) technology.
"The product will be launched in some pilot areas for invited user experience in the near future and will be promoted to other pilot areas in stages. The launch of the product fully relies on the respective advantages of commercial banks and operators."
This integration of CBDC payments with SIM cards enables users to conduct transactions offline without requiring an internet connection. This could potentially enhance the accessibility and convenience of CBDC transactions for individuals in areas with limited internet connectivity or during network disruptions.
The offline payment system being developed in China will enable users to make CBDC payments by simply bringing their phones close to sale terminals, eliminating the need for an internet connection. Governments worldwide are actively researching the feasibility of introducing CBDCs into their economies.
While CBDCs share similarities with cryptocurrencies, they are regulated and issued by central banks, resulting in smoother online payment systems.
China is at the forefront of CBDC experimentation, with the launch of its e-CNY app in 2020 and its expansion in 2022. By April 2022, CBDC trials were available in 23 cities, including major centres such as Shanghai, Beijing, and Shenzhen.
