Xi’an Bank and Hainan Bank are the latest Chinese banks to begin participating in the country’s central bank digital currency (CBDC) trials, Chinese media agency Sohu has reported.
China’s digital yuan is a form of legal tender which is issued by China’s central bank. It operates on a two-tier system where the central bank authorises eight operating institutions – the six largest state-owned banks, WeBank and MyBank – to issue digital yuan.
Xi’an Bank and Hainan Bank are second-tier commercial banks that will not have direct access to the digital yuan. Furthermore, given the administrative costs for second-tier banks, it is presently unclear how these commercial banks will be compensated for helping users access the digital yuan, according to Ledger Insights. Currently, digital yuan transactions are free, therefore they won’t earn money that way.
Regarding how will banks benefit from their role as a 2.5 tier service provider, the online publication says that one possible avenue is granting participating commercial banks an income for opening accounts for new users.
Another option is to charge fees for the exchange of digital currency through bank cards. However, this was ruled out by the Deputy central bank Governor Fan Yifei. The hint might be the reference to ‘individuals’, with the online publication suggesting earning money from merchants or retailers.
To learn more about CBDCs, download our ebook Central Bank Digital Currencies for Beginners – A Quick Guide into CBDCs.
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