Chinese state-run banks are ready to broaden their reach in integrating the country’s central bank digital currency (CBDC), the digital yuan, with government-issued social security cards. The initiative, promoted by the Chinese Ministry of Human Resources and Social Security, aims to add digital yuan payment functionalities to these identification cards, particularly useful in banks and government offices.
Efforts are concentrated on promoting third-generation cards that facilitate digital yuan payments, notably benefitting the elderly and rural populations. The urgency for this upgrade stems from low smartphone ownership rates among older citizens and rural dwellers, as well as an increased number of unbanked individuals in these demographics.
Several commercial banks, including one of the nation’s largest Bank of China, are investigating the feasibility of integrating digital yuan functionality to new social security cards. This state-run bank, approved to issue social security cards with bank card-like features in 2018, is now designing a sophisticated third-generation solution, blending cards with digital yuan wallets.
According to Li Xin, the Chief Business Manager of the bank’s Digital Currency Office, the concept extends beyond physical cards to encompass bracelets, portable tags, and more. The bank aspires to broaden the utility range of these new “wallet cards” to payments and micropayments. The innovative wallet cards, fobs, or wearable wallets will accommodate a plethora of payments, from bills to public transport and hospital charges, and even to receive pension payouts and other perks.
From Li Xin’s perspective, the digital yuan is remarkably practical, robust, secure, and applicable, fitting naturally with the evolved requirements of a comprehensive social security system encompassing both urban and rural areas. Xin asserts that the deep integration of the digital yuan in the social security scheme aligns with the current trajectory and advancement of the digital economy.
A study by the China International Capital Corporation suggests a boom in CBDC development over the next three years. Since late 2020, Chinese banks have been examining “hard” offline CBDC wallets, with an array of wearable hard wallets set to be disseminated to athletes and supporters at September’s Asian Games in Hangzhou, Zhejiang Province.
Aligning CBDCs with social security cards presents enormous potential in enhancing financial inclusion. However, questions concerning data privacy, security, and digital literacy, particularly among the elderly and rural citizens, pose significant challenges to be addressed before such seamless integration could become a reality.
Source: Cryptonews
