China has recently inaugurated a distinctive industrial park in the Luohu district of Shenzhen, adjacent to Hong Kong, expressly devoted to fostering the development of its digital yuan, commonly referred to as e-CNY.
This move comes as a significant addition to China’s dedication to establishing the Central Bank Digital Currency (CBDC). This park aspires to attract over 100 enterprises specializing in financial technology, blockchain, and other cutting-edge domains like artificial intelligence and cloud computing.
Shenzhen’s new digital ecosystem
This pioneering park commenced its operations with nine resident companies. Moreover, the district government has released ten initiatives to further expedite the growth of this nascent digital currency environment. These strategies span areas like payment solutions, the formulation of smart contracts, digital yuan marketing, and the creation of sturdy hard wallets.
Residents in the industrial park are eligible for incentives. According to the announcement, commercial banking entities are eligible to receive up to 20 million yuan ($2.7 million), while budding startups can garner up to 50 million yuan ($6.9 million) just for settling there. Additionally, the cumulative governmental financial backing is pegged at 100 million yuan ($13.7 million). Preferential loan rates are also part of the enticing package.
Among the early settlers in the park are noted industry players like Hengbao, Wuhan Tianyu Information, and Lakala Payment. While Hengbao and Tianyu are renowned for their payment card solutions, Lakala is recognized for its payment processing prowess and its collaboration with Visa.
It’s worth noting that this new project aligns with China’s strategy to hasten its sovereign digital currency’s R&D. The digital yuan, initiated by the PBOC in 2014, is visualized not as a cryptocurrency, but as a digital counterpart of the tangible yuan, with the solid backing of the central bank. China’s tryst with the e-CNY trials since 2020 has encompassed a vast user base and myriad merchants, integrating an array of functionalities.
The Chinese government has made various efforts to encourage the use of its digital currency, the digital yuan. Currently, it is in the pilot stage and being tested in 26 cities. The central bank digital currency (CBDC) has already been adopted by 5.6 million merchants and is expected to become more popular as the government continues to promote its use and technology advances.
However, while the recent introduction of features such as Visa and Mastercard options in the digital yuan app signifies progress, adoption still appears to lag, with just 261 million digital yuan wallets in circulation as of 2022. This series of developments underscores China’s unwavering commitment to carving a niche in the digital currency landscape, even as the e-CNY remains officially in its pilot stage.
