Opinion: China’s Digital Yuan Wallet Designed to Meet Everyone’s Needs
What is the digital yuan wallet?
Just as an old-fashioned wallet holds paper cash and cards, a digital yuan wallet (数字人民币钱包) carries the digital yuan. Working under the premise of centralized management and counterfeit prevention, the People’s Bank of China (PBOC) and all authorized operators such as commercial banks and payment platforms are building an ecosystem to manage the wallet, which can verify the authenticity of the digital yuan, and carry out different functions.
This ecosystem will allow the digital yuan to be used in both online and offline scenarios, meet the needs of users on every level, and ensure the currency’s inclusiveness while eliminating barriers to its use in terms of technology or dependence on telecommunications networks.
The digital yuan wallet has several dimensions:
1. Client identification. Operators will manage wallets according to the level of client identification (客户身份识别) and impose different limits on transactions and balances according to the level of real-name authentication. There will be four categories of wallet. The lowest level is for anonymous users where no client identification has been carried out, and they will have a balance ceiling of 10,000 yuan ($1,562), a single payment limit of 2,000 yuan and a daily cumulative payment limit of 5,000 yuan. The wallet can be opened simply by using a mobile phone number, reflecting the design principle of controllable anonymity. Users who want to pay more than 2,000 yuan in a single transaction can upgrade their wallet by uploading valid ID information and linking their bank account information. For example, after upgrading to the second-highest level wallet, the balance limit will rise to 500,000 yuan; the single payment limit will increase to 50,000 yuan; and the daily cumulative payment limit will rise to 100,000 yuan.
2. Personal and corporate. Natural persons and people running individually owned industrial or commercial businesses (个体工商户) can open personal wallets (个人钱包) and undertake relevant transactions according to the limits set by the level of client identification. Other legal persons and unincorporated units can open corporate wallets (对公钱包), where the transaction and balance limits depend on whether accounts are opened at a physical counter or remotely. The functionality of corporate wallets can be customized according to users’ needs.
3. Soft and hard. A soft wallet (软钱包) can be a mobile payment app or services developed with the use of a software development kit, a package of software development tools specific to the hardware platform and operating system to facilitate the creation of applications. A hard wallet (硬钱包) will consist of hardware such as integrated circuit cards, wearable devices and Internet of Things devices. For example, a hard wallet with health code functionality has been created for the elderly providing secure and convenient payment functions and facilitating daily travel under Covid-19 prevention and control measures.
4. Main wallet and sub-wallet. The wallet holder can set up a main wallet (母钱包) and create a number of sub-wallets (子钱包) under it. Individuals can personalize the functionality of each sub-wallet in terms of payment limits, conditions for payment, and privacy. Companies would be able to set up sub-wallets for specific functions such as collection and distribution of funds, accounting and financial management.
The different combinations will create a matrix system for the digital yuan wallet. The PBOC and designated operating agencies are jointly developing the basic components of functionality that will allow users to set up payments conditioned on parameters such as time, scenario and type of user. This will allow the further development of complex payment products, so that we can build an ecosystem for the wallet with special functionality that can fulfill users’ needs under multiple scenarios.
Mu Changchun is director of the Digital Currency Research Institute of the People’s Bank of China.
This article is adapted from Mu’s speech at the 13th Lujiazui Forum 2021 on June 11. It has been edited for clarity.
Contact editor Nerys Avery (firstname.lastname@example.org)
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