BEIJING/TOKYO -- From real-life trials to a proposed legal change, China has ramped up preparations for issuing a new digital currency ahead of the world's other big economies.
The People's Bank of China will be testing the digital yuan in 28 cities, including major metropolitan areas such as Beijing, Tianjin, Shanghai, Guangzhou and Chongqing, and is working on new features like easy transfers and better security. But the developments have raised alarms in the U.S., Europe and Japan that Beijing could become the dominant force behind the technologies and frameworks involved in digital currencies.
"We will create a standardized wallet," Mu Changchun, head of the digital currency research unit under the People's Bank of China, said at an event Sunday in Shanghai.
To prevent counterfeits, the PBOC appears to be planning universal standards for digital wallets so they only accept legitimate currency.
The Chinese central bank aims to launch the digital yuan before the 2022 Winter Olympics in Beijing. At a test in Shenzhen from Oct. 12 to 18, 47,573 participants spent over 8.76 million yuan ($1.31 million) of the digital currency.
"We will unveil new functionalities outside of payments in our future trials," Mu said on Thursday.
One example he gave is transferring money by placing two smartphones close to each other, intended to feel as easy as exchanging cash. "We have already developed this capability," Mu said.
The PBOC is also working with ride-hailing services such as Didi Chuxing, with plans to make the digital yuan available for online transactions in upcoming trials.
In the Shenzhen trial, the PBOC used cellphone numbers to track the currency from user to user. But the bank wants to give users access to the digital yuan even without a phone number or bank account information when it formally launches, likely so foreign visitors can also use the currency. Many are keeping a close eye on what other tracking methods the PBOC tries out in future tests.
China is also pulling ahead in terms of the legal framework surrounding a digital currency. While the U.S., European Union and Japan have yet to commit to issuing digital currencies, the PBOC on Friday published draft legislation to turn the digital yuan into legal tender. The draft would also ban the private sector from issuing cryptocurrencies. There is concern that digital currencies could destabilize the existing financial system and undermine monetary policy.