China is handing out free “red packets” of its digital yuan, worth a total of $6.2 million, in a Beijing lottery designed to test the central bank digital currency, according to reports.
Residents in China’s capital city can apply to win one of the 200,000 packets, which each contain 200 digital yuan ($31.33), Reuters reported. The digital cash, delivered via apps, can be spent at selected local retailers. The e-wallet is inspired by the Chinese tradition of giving red envelopes of money at milestone events or celebrations.
The lottery is part of the People’s Bank of China’s ongoing CBDC trials, in which the digital yuan is being tested and evaluated locally before being rolled out across the country. China is the first major economy to progress its CBDC initiative to the trial stage, with the US and the EU central banks still in the research stages of their respective digital currencies.
China is currently pursuing a two-tier approach to distributing its digital currency, in which the central bank disseminates its CBDC to the population via commercial banks.
To enter the Beijing lottery, people must apply through one of two banking apps required to participate in the trial. It will run until June 6, CNBC reported, and winners will be notified soon after and be able to spend the digital cash until June 20.
Other Chinese cities, Shenzhen and Chengdu, have held similar CBDC lotteries, and the central bank expects to carry out further local trials before rolling out the currency across the country. It is planning to trial the digital yuan for international visitors at the 2022 Beijing Winter Olympics.
Earlier this week, Yao Qian, the former chief of China’s CBDC efforts, said that digital currencies could eventually run on blockchain networks like ethereum. Commercial banks would then no longer have to function as an intermediary and financial inclusion would be improved, as users would not need a bank account to use the digital yuan, Yao said.