Yesterday the Chinese press reported the rollout of the digital RMB smart student ID card at the Hainan Lu Xun Middle School. This is the latest application of China’s central bank digital currency (CBDC), the digital yuan or eCNY. In January, the digital currency was widely used during the Winter Olympics, and recently pilots were extended to additional regions.
In reality the solution is a mobile SIM card rather than a payment card. Smartphones are banned from lower and middle schools in China, so the ID card is a mobile SIM in a feature phone with multiple functions beyond payments. It was developed by China’s biggest bank, ICBC, in conjunction with China Mobile.
The phone supports NFC for payments and identity and GPS to enable the child’s location to be tracked. Additionally, up to three family numbers can be programmed for speed dialing.
For payments, the child can use the card on the school’s campus, but the school can also authorize it for use with a list of off-campus merchants. Parents get to view the child’s payments made with the digital RMB smart student ID card and they can also top up the digital currency balance.
On the one hand, this is a solution that can provide peace of mind for parents. At the same time, from a young age, it instills compliance with third-party control and a sense that electronic activities are tracked.
At the other end of the age spectrum, one of the first applications developed for the digital yuan was to use the digital currency at senior care facilities.
Another new application this week is the use of the digital yuan to prepay merchants in the new Hainan Free Trade Port region. Consumers can prepay for services, and blockchain smart contracts are used to release funds to the merchants in line with user consumption. If the merchant goes out of business, the consumer can get their money back. From a merchant’s perspective, the payment flow is automated.
Meanwhile, apart from the domestic use of the CBDC, China is also active in a wholesale cross border CBDC initiative, the M-CBDC Bridge (MBridge) project, involving Hong Kong, Thailand and the UAE. Plus, there is a separate project with Hong Kong for the digital yuan.