China expands yuan pilot scheme to cover tax and social security premiums
2022 kicked off with a major leap forward for the e-CNY – also known as the digital yuan as Chinese authorities have broadened the range of public services included in its pilot project.
Three cities in Zhejiang province — located just south of Shanghai — have begun experimenting with the digital RMB for paying income tax, stamp duty and social security premiums. This development could give significant exposure to the e-CNY, which faces stiff competition from other online payment platforms.
A beta version of the digital yuan app was officially launched for iOS and Android on Chinese app stores. Although the coin has been available to some users in China for over a year under limited pilot programs, this is the first time to explore a variety of taxation payment methods using the digital yuan.
China continues to quietly test e-CNY
The app, which essentially involves physical cash converted into a digital form, is available on China’s Android app stores and Apple’s app store. The distribution of e-CNY takes place through a two-tier system that transfers the digital currency from the China’s central bank to commercial banks, which are then distribute the currency directly to consumers.
35 Chinese commercial banks now allow customers to access the country’s new central bank digital currency (CBDC), suggesting yet another step toward a wider rollout.
The Industrial and Commercial Bank of China (ICBC) was the country’s first bank to add full support for the digital renminbi. The state-owned lender has enabled a feature that allows clients to convert their digital yuan to cash at more than 3,000 ATMs across Beijing.
The digital yuan, which is controlled and issued by the China government, is a central bank digital currency (CBDC). Yet, the People’s Bank of China officially has not assigned a monetary value right now because the digital yuan has not been launched to the public yet.
This pilot program has since gradually been expanded through invites and cash incentives to eventually reach more than 150 million registered users.
On a commercial scale, the e-CNY is integrated into Alibaba’s services ecosystem. This allows users of Alibaba’s food and grocery delivery apps, as well as its e-commerce platforms to pay for orders using the e-CNY. Tencent-owned WeChat also allows users to select e-CNY as a payment option to pay on its messaging app and payment platform. The adoption comes even though the CBDC coin is a direct competitor to Alibaba’s Alipay and WeChat wallet.