Chinese Banks Launch Automatic Digital Yuan-to-Fiat Conversion Tools
Chinese banks are exploring new methods of enabling digital yuan users to earn interest on their central bank digital currency holdings – with “smart management” tools that can detect when funds have been left idle for long periods.
The move comes as the Chinese government ramps up its efforts to promote the use of the digital yuan – also known as the e-CNY – with several high-profile pilot projects underway in major cities such as Shenzhen and Suzhou.
And while the digital yuan is not yet available for general use, some banks are already testing out tools that would enable customers to automatically convert their e-CNY into fiat currency when it is idle for a certain period.
According to a report in the South China Morning Post, the Agricultural Bank of China – one of the country’s “big four” state-owned commercial banks – is testing a “smart management” tool that would automatically convert e-CNY into yuan when it has been idle for more than three months.
The tool, which is being piloted in the city of Suzhou, is designed to encourage digital yuan holders to use the currency more actively and prevent them from hoarding it.
Similarly, the Industrial and Commercial Bank of China is testing a feature that would allow account holders to automatically convert their e-CNY into yuan if it remains inactive for more than six months.
The move comes as the Chinese government ramps up its efforts to promote the use of the digital yuan ahead of the 2022 Winter Olympics in Beijing.
Per reports from Sina, the banks offering such service include the commercial giant the Industrial, China Construction Bank (CCB), and Commercial Bank of China (ICBC). The Commercial Bank of China (ICBC) is rolling out solutions in its app that allow customers to customize settings on their wallets – allowing AI and algorithms to “automatically” add digital yuan holdings above a certain amount (or left idle for a certain amount of time) to fiat saving accounts.
A similar solution has also been developed by the China Construction Bank (CCB), which also allows users to perform real-time top-ups from their fiat accounts if they attempt payment from their linked digital CNY wallets but have insufficient digital yuan funds to complete the transaction.
The CCB has named this function Automatic Combination Payment and says that it will allow customers to choose the fiat accounts they want to link to their wallets in this manner. A maximum of around USD 743 worth of fiat can be “combined” in any single transaction, with a daily limit of some USD 1,488 placed on “combination” payments.
Last month, the People’s Bank of China announced that it would be launching a series of pilot programs in cities across the country to test the use of digital currency in real-world scenarios. The digital currency often referred to as “DCEP”, is seen as a way for the country to reduce its dependence on the US dollar and to have more control over its monetary policy.
The new tools will allow CCB customers to convert their yuan into digital currency and then use it to make payments or transfer funds. The process is similar to how users currently convert their fiat currency into Bitcoin or other cryptocurrencies.
The launch of these new tools by the CCB suggests that the bank is confident in the future of the digital yuan and is preparing for its wider rollout. It is also a sign that the Chinese government is moving closer to its goal of establishing the digital yuan as a major global currency.
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