digital currency Photo: VCG

China's central bank said an experimental test of the sovereign digital currency is now only focused on small retail transactions and has not expanded to scenarios that require large volume transactions.

The bank's comment comes after rumors circulated over the weekend claiming that a housing transaction in Shenzhen, South China's Guangdong Province, supported the use of China's Digital Currency Electronic Payment (DCEP).

Some netizens claimed that somebody in Shenzhen received a large volume of digital currency from a local bank after selling a local property, and that the digital currency could not be converted into banknotes. 

In response, an employee of the People's Bank of China was quoted as saying in a Sina news report that the DCEP is the same as yuan in legal tender and is a two-way convertible with banknotes at a rate of 1:1. 

China has been speeding up its research and development of DECP in recent years in a bid to win the global race to launch one, and against the backdrop of strained relations with the US. 

Currently, pilot tests of DCEP are ongoing in Shenzhen; Suzhou in East China's Jiangsu Province; Chengdu, the capital of Southwest China's Sichuan Province; and the Xiongan New Area in Hebei Province.

The Shenzhen subsidiary under the central bank's digital currency research unit has been hiring more in recent months, the Beijing News reported. It posted recruitment positions for blockchain development and research engineers in early August.  

Market observers expect more Chinese cities to join the trials next year. 

"At its current stage, the test's primary goal is to ensure the digital currency's operation runs smoothly and safe, and to determine how DCEP is distributed from the central bank to financial institutions. Only when trials in retailing are successful will they be carried out in large transaction scenarios," Wang Peng, assistant professor of the Gaoling School of Artificial Intelligence at the Renmin University told the Global Times Monday. 

China's Ministry of Commerce also issued a plan to deepen innovations in trade and services on August 12, saying that it will launch the pilot tests of DCEP in "qualified localities" in Beijing-Tianjin-Hebei Region, the Yangtze River Delta, the Guangdong-HK-Macao Greater Bay Area and central and western China.