China to hand out $6.2 million in digital currency to Beijing residents as part of trial

A digital Chinese currency red packet is seen on a mobile phone in an arranged photograph as Chengdu city starts to distribute 200,000 E-CNY ‘red packets’ worth 40 million yuan on February 24, 2021 in Yichang, Hubei Province of China.
VCG | Visual China Group | Getty Images

GUANGZHOU, China — China will hand out 40 million renminbi ($6.2 million) of its digital currency to citizens in Beijing in a lottery.

Residents of the Chinese capital can use two banking apps to apply to win one of 200,000 so-called red packets as part of the lottery, according to the Beijing Local Financial Supervision and Administration Bureau.

Each envelope contains 200 yuan (about $31) of the digital currency which can be spent with selected merchants. The deadline to register is midnight on June 7.

The world’s second largest economy has yet to do a nationwide rollout of the digital yuan, which it has been developing since 2014, but is instead focusing on trials in the form of lotteries around the country.

Li Bo, deputy governor of the People’s Bank of China (PBOC), said in April that the central bank would expand the scope of its pilot projects and could even allow foreign visitors at the 2022 Beijing Winter Olympics to use it.

In February, the southwestern Chinese city of Chengdu handed out 40.2 million yuan of the digital currency. Last year, other cities such as the Chinese technology hub of Shenzhen held their own lotteries.

The digital yuan is not a cryptocurrency like bitcoin. For one, it is issued by a central authority — the PBOC — while bitcoin is not and therefore “decentralized.”

Instead, China’s efforts are an example of a central bank digital currency (CBDC) and the PBOC is aiming to digitalize bank notes and coins in circulation.

In April, PBOC Deputy Governor Li reiterated the digital yuan was for domestic use and not and attempt to challenge the dominance of the U.S. dollar.

“For the internationalization of renminbi, we have said many times that it’s a natural process and our goal is not to replace (the) U.S. dollar or any other international currency,” Li said. “I think our goal is to allow the market to choose and to facilitate international trade and investment.”

China’s continued testing of the digital yuan comes as authorities renew a crackdown on the cryptocurrency sector in the country. While local cryptocurrency exchanges were banned in 2017, regulators are now turning their attention to cracking down on bitcoin mining.