Bank of China Tests Digital Yuan SIM Cards

One of China’s largest state-owned banks, the Bank of China, is currently testing a novel offline payment system that connects to SIM cards.

This payment method is designed specifically for the digital yuan, the digital currency issued by China’s central bank digital currency (CBDC).

The announcement on July 10 revealed the bank’s partnership with China Telecom and China Unicom, as well as its intention to begin testing the following day.

The bank intends to integrate its digital yuan app with near-field communication-capable “super SIM cards” to enable users to make mobile payments.

For payment, users need only bring their mobile phones near point-of-sale terminals, eliminating the need to power on the device.

This integration permits transactions to be processed even when the phone is off.digital

However, according to the bank, these SIM card payment functions will only be available on select Android phones in a few test regions in China.

The People’s Bank of China, the country’s central bank, released a trial version of the digital yuan app in January 2022.

This follows China’s recent initiative to expand the use cases for its CBDC as part of its Belt and Road Initiative and cross-border trades, with plans to extend the use of the digital yuan to pay taxes and utility bills within the country.

On ten transit routes, the digital yuan can now be used to pay for public bus rides in Guanzhou. To accomplish this, passengers need only download the digital yuan app, deposit funds, and scan the QR code in the bus payment section.

In the meantime, Hong Kong launched an e-HKD pilot program in May, following the Hong Kong Monetary Authority’s (HKMA) publication of a white paper on a potential retail CBDC in October 2021.

Hong Kong’s de facto central bank, the HKMA, stated in a September 2022 consultation paper that it will investigate the possibility of cross-border payments involving digital yuan and e-HKD.