People’s Bank of China Tests New Digital Currency
Partnering With Rideshare Company, Didi
Didi Chuxing, the Beijing-based rideshare company, has partnered with the People’s Bank of China to test a new digital currency. The currency does not yet have an official name, but it is currently referred to as “digital currency/electronic payment,” or “DC/EP.” DC/EP will share some characteristics with bitcoin and Facebook (FB)’s Libra. Chinese officials have said eventually it will replace some cash in circulation, but will not replace money supply like bank deposits. The Chinese government hopes that DC/EP will be a useful way to curb money laundering in the country.
The People’s Bank of China has been working to create the digital currency since 2014. In April 2020, the bank conducted successful tests of DC/EP using it to pay a portion of government employees’ salaries in four Chinese cities. After launching its digital currency with Didi, PBOC also plans to test it through partnerships with other businesses. In a new city being built outside of Beijing, DC/EP will be rolled out at several restaurants including Starbucks (SBUX) and McDonald’s (MCD).
An Economy Primed for Digital Payments
When the new currency is rolled out with Didi, it will become available to the company’s 500 million users. Didi is sometimes called “the Uber (UBER) of China.” While the company does control more than 90% of the ride-hailing market in China, it also offers freight transportation, bike rentals, deliveries, and other services. Smartphone payments are widely used in China already, and their popularity has increased during the pandemic. Didi users can already pay for services by using Tencent’s (TCEHY) WeChat Pay and Alibaba’s (BABA) Alipay, meaning they will be primed to use the new digital currency.
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