China Reportedly Tries to Limit the Use of Cash in 3 Regions, in Preparation for the Digital Yuan

At this point in time, most members of the digital currency community are aware of China’s plans of introducing a digital version of the Yuan, in the form of a central bank-backed digital currency (CBDC).

Although the details are still blurry, reports indicate that China’s national cryptocurrency will be officially released sometime next year. So far, several adaptations have been made to China’s regulatory framework, to help accommodate the upcoming digital currency. Anyhow, you cannot mass-release a national digital currency without first testing it in real-life use cases.

According to recent reports, China has begun ‘phase 1’ of their national digital currency project. If accurate, this phase implies that the People’s Bank of China (PBoC) will introduce strict capital controls in several regions, in an effort to encourage the disappearance of cash. As such, this capital control entails imposing a limit on transactions made in three regions: Shenzhen, Hebei and Zhejiang.

The new guidelines specify that large transactions are generally associated with money laundering, corruption and criminal financing; therefore a limit will be imposed on transactions above the $71K threshold for businesses, and $14K for individuals.  Withdrawals beyond these sums will be possible, but only after completing a registration process with financial authorities.

According to several sources, the idea behind these limits is to not only reduce illegal financing, but also to reduce the overall amount of cash that is used in these regions. Then, the digital currency can be rolled out as part of an experiment meant to observe how the public adapts to the new CBDC payment system.

Recently, the People’s Bank of China also made an announcement regarding rumours indicating that the digital yuan was already rolling out. According to the bank, “the People’s Bank of China has not issued legal digital currency (DC/EP) and has not authorized any asset trading platform to conduct transactions. The People’s Bank of China has been studying the legal digital currency since 2014 and is still in the process of research and testing. The market transactions “DC/EP” or “DCEP” are illegally set digital currency, and the legal digital currency issuance time is inaccurate.”

Based on this statement, we can conclude that there is a lot of false information on the Digital Yuan circulating around the web. Despite this aspect, we know that the coin is currently being developed and that it will be released sometime in the middle-term future. Any other details regarding the development process, coin architecture or the specific laws governing the Digital Yuan have not yet been released.