Chinese State-Owned Banks Start Exploring Digital Yuan Use-Cases for Buying Investment Funds & Insurance Products

Two major government-owned Chinese banks are expanding their pilot programs for the national Digital Currency. China Construction Bank (CCB) and Bank of Communications (BOCOM) have begun studying the new use cases of the digital renminbi by allowing citizens to use it to purchase investment funds and insurance products online.

The two state-run banks are working with fund management and insurance companies to enable China’s digital currency payments for sectors beyond the retail landscape.

China Construction Bank has partnered with the investment funds platform, Shanghai Tiantian Fund Distribution, to allow citizens to make online fund investments with the e-yuan. The partnership also involves JD.com, the Chinese e-commerce giant, valued at around $120 billion, listed on the Nasdaq US stock market.

Zhang Min, the executive vice-president at China Construction Bank, talked about the development and said: “We have since 2017 been participating in the research and development of the central bank digital currency, which we view as significant for our payment system due to its ability to enhance payment efficiency.”

China Construction Bank stated that it has opened 8.42 digital yuan wallets to 7.23 million individual users and 1.19 million companies.

As of June, China Construction Bank had reported a cumulative 28.5 million transactions that totalled 18.9 billion yuan (US$2.9 billion) using the digital yuan.

Bank of communication (BOCOM) examines the use of the e-yuan to fund management and insurance firms.

Qian Bin, the executive vice president at BOCOM, commented about the current development and stated that the bank is currently examining various use cases for the digital yuan in fund management and the insurance landscape.

“China’s central bank digital currency is a form of legal tender, and from the perspective of a commercial bank, it is our obligation to facilitate the development and liquidity of the currency,” Qian said.

However, Qian did not mention the fund managers or insurance firms that the bank is working with. As of June, the Bank of Communications had recorded 6.3 million e-yuan transactions that totalled 2.5 billion yuan. 

The efforts by the two government-owned banks go beyond the original blueprint of the CBDC set out by China’s central bank, which was intended to power the low-value, daily retail payment landscape only.

Digital Renminbi Available for Exchange

While China’s retail central bank digital currency (CBDC) will be circulated among the public, its wholesale CBDC will be issued to commercial banks and other institutions for large-volume transactions.

Last month, 35 Chinese commercial banks allowed customers to access the country’s new CBDC, a move that suggested another step towards a broader rollout.

Apart from the six state-run banks, the financial institutions that support deposits and withdrawals in the digital yuan include major names like CITIC, China Everbright, China Merchants Bank, Shanghai Pudong Development Bank, Minsheng, Ping An, Guangfa and Zheshang, amongst others.

Thousands of citizens have been selected by a lottery system to allow them to spend their national digital currency, popularly known as digital currency electronic payment (DCEP) in both online and offline stores using a dedicated app.

The Industrial and Commercial Bank of China (ICBC) was the first bank in the country to add full support for the digital yuan. The state-owned bank has enabled a feature that allows clients to convert their digital renminbi to cash at more than 3,000 ATMs across Beijing.

China continues testing its national digital currency pilot programs and setting up a legal framework for CBDCs with global financial regulators. 

China’s central bank has not assigned a monetary value on the digital yuan because the CBDC has not been officially launched to the public. Though China’s government remains committed to make the digital renminbi mainstream, it has been keen to ban the use of Bitcoin and other private cryptocurrencies within its jurisdiction.