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 of time.
The central People’s Bank of China (PBoC) has repeatedly stated that the digital CNY’s main raison d’être is to function as a retail payments tool. As such, digital yuan wallets and their contents accrue no interest when not in use. However, anticipating perhaps that many customers are simply too busy to spend time converting digital yuan holdings into conventional fiat so that they can earn interest on their funds, some commercial banks in the country have developed solutions that automatic convert funds from digital yuan wallets into fiat, which is moved into deposit accounts.
Per Sina, the banks offering such service include the commercial giant the Industrial and Commercial Bank of China (ICBC), which 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 in the event that they attempt a 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.
Leading academics were quoted as explaining that existing pilots have focused almost entirely on retail scenarios – in-store and online transactions. The digital yuan, the academics claimed, has thus far been used much in the way that banknotes and coins once were. Commonly termed M0 in the economic sphere, such items are only in circulation, but have no function in the world of lending, interest accumulation, and borrowing.
This development, however, would theoretically allow the digital yuan to break out of the M0 space in some limited form. But the experts were keen to point out that the token is still very much a retail tool, and that its advent will do little if anything to accelerate the “de-dollarization” of the Chinese economy.
Others predicted that further “improvements in balance and payment functions” would follow, with banks continuing to work on ways to integrate the token.
Meanwhile, a leading traditional Chinese medicine healthcare provider has become the first hospital in Hangzhou to begin accepting digital yuan payments from patients.
Hangzhou Net reported that the Zhejiang Provincial Hospital of Chinese Medicine – which was founded in 1931 – began offering both app-based payments and offline digital CNY payments after striking a deal with the CCB’s Hangzhou Branch.
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