The Chinese media agency Sohu reported that Xi’an Bank and Hainan Bank are the latest Chinese banks to begin participating in the country’s central bank digital currency (CBDC) trials. News of this development is significant because both are second-tier commercial banks that will not have direct access to the digital yuan.
Given the administrative costs for second-tier banks, it is presently unclear how these commercial banks will be compensated for helping users access the digital yuan. Currently, digital yuan transactions are free so they won’t earn money that way.
China’s digital yuan is a form of legal tender which is issued by China’s central bank. It operates on a two-tier system where the central bank authorizes eight operating institutions – the six largest state-owned banks, WeBank and MyBank – to issue digital yuan.
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