China Takes Steps to Become First Cashless Society Amid Pandemic

China's central bank has accelerated the testing of its sovereign digital currency to become the world's first cashless society. It will include certain foreign consumer brands in the program.

27 April, 2020 | AtoZ Markets – Since the spread of the coronavirus began, the interest of cashless payments has increased sharply. Fear of the spread of the virus through banknotes, people rely on mobile payments in China and around the world. China rolled out its digital currency earlier this month in four cities, making it the world's first cashless society. 

Mcdonald's, Starbucks and Subway Will Use Digital Currency

American chains have designated, along with an assortment of small businesses, as locations that will test the Chinese digital yuan as it accelerates its deployment. American chains Starbucks, McDonald's and Subway have been named to the People's Bank of China (PBOC) list of companies. Those companies will test the digital currency in small transactions with 19 local companies.

The global names will join by convenience stores, a bun shop, a bakery, a bookstore, local hotels and a gym. However, the inclusion of companies providing common goods and services marks an extension of PBOC testing. The test of the project is based on two principles. The central bank issues virtual currency to commercial banks, which then pass it on to consumers, to replace cash in all transactions.

"Digital RMB (renminbi, or yuan) is a natural evolution of digital payments," said Ling Zhang, vice president of Binance. "No one imagined how universal digital payments would be five years ago. But it's a growing understanding", and now consumers are ready for digital currency, she said.

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China Is on the Way to Become a Cashless Society

PBOC has researched its centralized digital currency for more than five years. The bank plans to issue the digital currency called DC/EP soon. The Chinese digital yuan is a currency that behaves like standard cash but only exists as a code in a digital wallet, supported by PBOC.

China's issuance of digital currency is a big step towards digitizing the financial market. But it has also been the subject of criticism from the crypto community. Chinese authorities could use this centralized currency to monitor people's financial activities.

China is the first major economy to announce plans for a sovereign digital currency, aimed at better controlling the rapid increase in digital payments worldwide. However, the PBOC has suppressed trade in other digital currencies and prohibited banks from accepting cryptocurrencies, which it sees as a risk to financial stability.

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