Suzhou embarked on the first phase of its central bank digital currency (CBDC) trial on December 12, when China was deep in its Double 12 festival over the weekend. According to Chinese online publication the Global Times, Suzhou completed 20,000 transactions over the weekend successfully over one of e-commerce’s busiest days with over 10,000 physical merchants and also online shopping site JD.com.
100,000 citizens in Suzhou received approximately $30 USD worth of yuan and have been given until December 27 to use up their red packets. JD.com says that their very first transaction was recorded within 2 seconds, and that 80% of their transactions originated from millennial shoppers, primarily those born in the 1980s and 1990s.
12.12 is the largest sales day that China goes through annually after Singles Day on November 11, and the approaching holiday and festive season typically drives consumers to make purchases on this day as well to cash in on discounts, leading to huge volumes of transactions. Beginning the trial over this weekend was a significant and deliberate stress test for the digital yuan, or DCEP, which allowed China to gain greater insight into the real-world use of the digital currency.
Aside from actual purchases at merchants, Suzhou is also getting first dibs on testing the DCEP’s new tap feature for transfers, a limited trial that will see the cooperation of Huawei Technologies, the company behind China’s top homegrown mobile and internet devices brand.
China is currently leading ahead in the CBDC competition. Cao Yin, Managing Director of the Shanghai-based Digital Renaissance Foundation, said that China is approaching the DCEP cautiously at an appropriate pace, as every other country sees China as a possible benchmark for their own CBDC development. This means that it currently has no other equal competitor and does not need to rush with their continued trials and progress.
Moreover, once China launches the digital yuan for good, Cao noted that collecting usage data and also applying fixes to any technical issues that could occur will become immensely challenging. Releasing the DCEP prematurely also opens China to the risk of attacks by malicious actors, be they from other countries or organizations.
“In 2021, China will continue to look for more scenarios to test the digital yuan, but an extensive launch is still unlikely,” Cao said. “China should be the first country to launch a digital currency, while countries like the US are looking to summarize China’s experience and avoid risks. In a sense, we have only ourselves to compete with on this matter, and there’s no need to rush it.”