The digital yuan (e-CNY) has been proven usable in large-scale scenarios without any stability concerns, the Deputy Governor of the People’s Bank of China (PBOC), Fan Yifei, has said at the commissioning of a trial zone for the e-CNY in Beijing on Friday.

China Daily reports that the zone, where there will be a large-scale testing programme of the e-CNY, will be under the PBOC’s Digital Currency Research Institute. It is where the digital currency’s application scenarios based on Huawei’s operating system HarmonyOS were introduced to users for the first time. 

Fan said “some problems need to be solved first” though even as he identifies that they “support the connection between the e-CNY and traditional electronic payment systems, as well as promote the connection between digital wallets and bank accounts.”

Also speaking at the China (Beijing) Digital Finance Forum 2021, the vice-president of the AI and smart scenarios of consumer business department of Huawei, Duan Mengran, said the HarmonyOS and e-CNY cooperation could explore more applications like smart devices such as treadmill, POS and ATMs in the future. He adds that a “new era may come soon” with the applications’ connection and “can be used for e-CNY payment.” 

China has been leading and continues its e-CNY trials ahead of the 2022 Winter Olympics in Beijing. Within its borders, the likes of online delivery giant Meituan joined in distributing digital yuan “red packets” worth 10 yuan ($1.55) last week. 

Meituan is running the trial with Agricultural Bank of China, China Postal Savings Bank, and China Construction Bank for residents in nine cities and regions, including Beijing, Shanghai, the Xiongan New Area, and other cities that have e-CNY pilot programmes.

Outside of China, authorities in many other countries including those in the EU and Nigeria, have been progressing with and publishing their own central bank digital currencies (CBDCs) plans. Meanwhile, there’s been a call on major central banks to act faster with their digital currency projects to avoid falling behind private sector payment initiatives that are already taking root. 

Head of the Bank for International Settlements (BIS) Innovation Hub, Benoît Cœuré, noted in a speech at the Eurofi Financial Forum on Friday that central banks need to know where they want to go as they embark on their CBDC journey. He adds that banks should expect some challenges in the process. He said: 

“We should roll up our sleeves and accelerate our work on the nitty-gritty of CBDC design,” he said. “CBDCs will take years to be rolled out, while stablecoins and crypto assets are already here. This makes it even more urgent to start.”

He added that while big techs are expanding in retail payment, stablecoins are seeking regulatory approval and decentralised finance (DeFi) platforms are challenging traditional financial intermediation, they all come with different regulatory questions, which need fast and consistent answers.

“Banks are worried about the implications of CBDCs for customer deposits. Central banks are mindful of these concerns and are working on answers. They see banks as part of future CBDC systems. But make no mistake: global stablecoins, DeFi platforms and big tech firms will challenge banks’ models regardless.” 

Cœuré’s BIS Innovation Hub recently launched Project Dunbar with the Monetary Authority of Singapore, the Reserve Bank of Australia, Bank Negara Malaysia, and the South African Reserve Bank to test the use of CBDCs for international settlements.