China’s Digital Yuan Gets First Big Test Via Tech Giant Didi
Ride-hailing giant Didi Chuxing is testing China’s digital cash as a payment method on its platform, in what could be one of the first real-world applications of the electronic version of the yuan.
The SoftBank Group Corp.-backed startup said on Wednesday it’s working with a research wing of the People’s Bank of China on uses for the virtual legal tender dubbed Digital Currency Electronic Payment, or DCEP. That includes testing the token on its ride-hailing platform, people familiar with the matter said. Specifics like when the feature will officially roll out aren’t clear yet, they said, asking not to be identified because the plan is private.
Shares in Chinese financial software and information security companies including Feitian Technologies Co. and Julong Co. rose by their 10% daily limits on the news. Representatives from the PBOC had no comment when contacted.
China’s government began a pilot program for its digital currency, which lives on a mobile wallet application and offers Beijing greater control of the country’s financial system, a few months ago. The initial testing was limited to four cities, with local media reporting that some of the money was distributed via transport subsidies to residents in Suzhou. However, implementation remains a question. China’s $27 trillion payments industry is already dominated by twin internet giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd.
Adoption by Didi, which connects half a billion Chinese commuters, would drive acceptance of China’s digital coin and widen Beijing’s global lead in government-sanctioned virtual tokens. Didi currently employs payment tools from Tencent and Alibaba-backed Ant Group, so it would appear to be a good candidate for DCEP. Beyond its core ride-sharing business, Didi is luring grocers and merchants onto its platform — and they could also become users of the national digital tokens.
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China’s central bank has led global peers in development of digital legal tender, with research efforts started in at least 2014. The digital currency is intended to eventually replace coins and banknotes, and could offer an alternative to the dollar-based international payments systems.
“DCEP will become a key infrastructure of digital economy,” Didi said in a Chinese statement. It will work with the government to “boost the integration of the digital economy with the real economy.”