China's six major state-owned banks started promoting digital yuan wallets in Shanghai. People can apply for a trial use of the wallets at the banks' outlets, the Shanghai Securities News reported on Tuesday. The digital yuan will be issued by the country's central bank and legally backed by the government as an alternative to paper money.
The wallets are set up on the central bank's digital yuan app and can be used in many online retailing platforms, including JD.com, Meituan, and even vending machines in Shanghai subways, as well as physical shopping centers, such as Huijin Department Store.
The Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and the Postal Savings Bank of China are the banks participating in the trial run.
The digital yuan wallet is of great significance to individual consumers because it does not necessarily have to be bound to a bank account, a major feature that distinguishes it from third-party payment tools like Alipay or WeChat Pay.
The current payment tools, whether they are bank cards, WeChat Pay or Alipay, are bound to bank accounts, which require real-name registration, and therefore they cannot meet demands of anonymous payment.
However, the digital yuan wallets technically enable small amounts of anonymous payment, according to Mu Changchun, head of the central bank's digital currency research institute.
Speaking at the China Development Forum on Monday, Mu dismissed concerns of user privacy infringement, saying the digital currency has the highest level of privacy protection among existing payment tools.
The digital yuan wallets have a limit of 1,000 yuan (about $154) for transactions on the initial day. But people can apply for an update of the limit in the future.
The central bank-backed digital yuan is currently under trial in Beijing, Shenzhen in Guangdong Province, Suzhou in Jiangsu Province and Chengdu in Sichuan Province.
Other countries including Canada and Japan have also been gearing up preparations for digital currencies.
In the U.S., Federal Reserve Chairman Jerome Powell said the Fed will take its time to study the idea of a central bank digital currency before moving forward to take all factors into consideration.
"We don't need to rush this project, and we don't need to be first to market," Powell said a virtual panel hosted by the Bank for International Settlements Monday morning, quoted by the American Banker publication.