China digital currency: Beijing forum promotes SIM-based ‘e-CNY hard wallet’ as an alternative for mobile payments

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Chinese mobile carriers China Telecom and China Unicom, and the Bank of China, are promoting a hardware version of the country’s digital currency – a SIM-based e-CNY payment service – as an alternative to existing mobile payment apps.

With China’s central bank digital currency research arm struggling to persuade consumers to use the official e-CNY app or digital currency wallet embedded in mobile apps, the SIM card-based payment was promoted at a conference in Beijing on Thursday as a good alternative.

The two carriers and the Bank of China highlighted that the SIM card wallet can enable payment without an internet connection or even battery power. The “e-CNY hard wallet” was one of the key products promoted at the 2023 China Digital Finance Forum.

The SIM card was launched in July by Bank of China and the two mobile carriers. The application has been tested in several consumer-facing scenarios, including subways and universities, and in a few Chinese cities.

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For example, in the subway stations of Qingdao in eastern Shandong province and Suzhou in Jiangsu province, people with e-CNY accounts and SIM cards in their phones can pay their metro fares with a tap of their phone, and such payments can even be made when the phone has no internet connection or power.

The Bank of China said the “e-CNY hard wallet” has several advantages, including improved safety, reliability and convenience.

“SIM cards are the most widely-used secure hardware medium … customers can make payments anytime and anywhere, which reduces costs and enhances the universality of e-CNY usage,” Bank of China said in a statement when the product was launched in July.

The forum, with the theme of “integration and evolution: to build a new ecology of digital finance”, was co-organised by several official agencies including the Beijing Municipal Bureau of Local Financial Regulation and Supervision, the government of Fengtai District in Beijing as well as the Digital Currency Research Institute of the People’s Bank of China, the central bank agency responsible for developing the digital yuan.

Other fintech offerings promoted at the event included an e-CNY smart contract product as well as solutions for cross-border e-CNY payments.

The People’s Bank of China launched trials of the e-CNY at the end of 2019. Cities were selected based on factors such as major national development and coordinated regional expansion strategies, as well as location-specific industrial and economic factors.

However, the technology behind the e-CNY has remained opaque. Digital yuan is not minted on a blockchain, but it has been made compatible with cross-border programmes, such as the mBridge with Hong Kong.

Mu Changchun, head of the Digital Currency Research Institute, in September urged commercial mobile payment providers such as Tencent Holdings’ WeChat Pay and Ant Group’s Alipay to work to improve their interoperability and unify quick response (QR) codes for e-CNY payments.

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