Chinese Banks, Firms Make Digital Yuan Smart Contract Progress

Chinese banks and businesses want to step up their use of digital yuan-powered smart contracts, as the financial and industrial sectors eye CBDC progress.

Per the Securities Times (via Stockstar), the state-run Postal Savings Bank of China has “officially” co-launched the nation’s first “prepayment product” to make use of digital yuan smart contracts.

Unlike many other CBDC projects, the e-CNY is not blockchain-based.

Rather than making use of decentralized ledger technology, it utilizes centralized IT solutions.

These solutions are all controlled by the central People’s Bank of China (PBoC).

But the PBoC has been keen to cherry-pick IT advances from the world of Bitcoin, crypto, and blockchain, with a view to integrating these in the e-CNY project.

One of these is smart contract technology.

Chinese economic thinkers believe this will help in business areas like financing and local government spending.

The Postal Savings Bank’s platform has been created in conjunction with China Fangyuan, a heavy machinery, transport, and construction-focused business group.

The parties have called their new platform Wuka, and say it can provide merchants with a range of “business capabilities,” including card issuance, project supervision, marketing, and management.

The media outlet noted that the new platform “introduces digital yuan smart contracts into the merchant business field.”

It added that the move would also “promote the use of the digital RMB” in the “prepayment space.”

Prepayment deals are common in industries where vendors provide custom- or tailor-made products or services.

Banks worldwide are growing increasingly keen on using smart contract technology.

But in China, state-run entities have attempted to integrate this with the digital yuan project.

In a column published in the financial newspaper Caixin, the Digital Currency Department of the Industrial and Commercial Bank of China ( ICBC), wrote:

“In the future, all contracts based on […] payments in the digital economy will be [compatible] with digital [yuan-powered] financial services.”

The ICBC wrote that digital yuan smart contracts would be particularly valuable “in situations where trust is weak and where breaches of contract occur frequently.”

The e-CNY & Smart Contracts: New Ground for the Chinese Digital Yuan?

The bank noted that e-CNY smart contracts will “effectively ensure the enforcement and automatic honoring of contracts.”

Using the CBDC in smart contracts makes sense, the ICBC claimed, because “credit rating is upgraded from the commercial credit of a commercial entity to the national creditworthiness of the PBoC.”

The use of the coin will thus “enable mutual recognition and interoperability across business sectors,” the ICBC concluded.

On the retail front, the PBoC is hoping to attract international attention for its coin at the 19th Asian Games.

The games got underway on September 21 in Hangzhou.

Spectators, athletes, and coaches will be shown how to use the coin at “experience booths” run by the likes of the ICBC at and around games venues.

Domestic spectators, meanwhile, have been encouraged to use the coin to buy tickets and pay for public transport rides to event venues.