Current Status of Digital RMB Smart Contract Applications: At Least 5 Major Scenarios, Recent Progress Significantly Accelerated

Organizer: Gong Quanyu, Chain Catcher

In July 2021, the People's Bank of China released the "White Paper on the Research and Development Progress of Digital Renminbi," which mentioned that "digital renminbi achieves programmability through smart contracts that do not affect the functions of currency, allowing for automatic payment transactions based on conditions and rules agreed upon by both parties, thus promoting innovation in business models."

A research report on digital renminbi published by Anxin Securities pointed out that the programmable smart contracts of digital renminbi essentially provide a conditional payment function for digital renminbi. Users can make payments based on the time and conditions negotiated by both parties, thereby establishing a trust mechanism through technological means.

The report also believes that this feature is the most important aspect that distinguishes digital renminbi from paper money, deposits, and other electronic currencies. Through the programmability and conditional payment characteristics of digital renminbi, it is expected to create many new currency application scenarios that were previously unattainable, greatly expanding the application boundaries of digital renminbi.

Since July 2021, the smart contract function of digital renminbi has been implemented in many practical scenarios, playing a positive role in promoting the development of the real economy. So, what application scenarios does digital renminbi currently have? Chain Catcher has organized this information based on publicly available data.

Transaction Settlement

At the end of August 2021, in the Guoneng e-purchase mall of the State Energy Group Material Co., Ltd., an e-commerce transaction amount was successfully paid from the material company's e-commerce center digital renminbi wallet to the material company's Beijing distribution digital renminbi wallet through an automatic transaction via smart contract. A relevant person in charge of the material company stated that this marks the first online transaction based on smart contracts in the B2B field to land in Guoneng e-purchase.

The person in charge stated that the success of this online transaction is the result of the joint efforts of the material company and partners such as Postal Savings Bank. This transaction introduced smart contract technology, strengthened risk control measures, broke through the traditional online banking account transaction model of enterprises, and achieved online automatic transactions and settlements based on enterprise digital renminbi wallets for the first time, greatly improving the efficiency of B2B transactions and settlements. (Source link)

Leasing Fund Supervision

In early December 2021, Agricultural Bank of China Shenzhen Branch, in collaboration with Huawei, completed the industry's first application scenario of digital renminbi cloud-side smart contracts. In the leasing fund supervision scenario led by the Shenzhen Housing and Urban-Rural Development Bureau, regulatory rules were set through digital renminbi cloud-side smart contracts, and leasing funds would be released to the regulatory platform periodically according to the rules to ensure fund safety.

It is reported that when the lessee (tenant) selects a house, signs a contract, and pays the deposit and rent through the smart leasing platform, the funds will reach the digital renminbi account of the leasing enterprise (landlord), while generating a smart contract that binds the funds. The smart engine will automatically release the rent for the month on the rent payment date and automatically refund the digital renminbi deposit to the lessee after the lease expires. Under this process, the smart contract objectively standardizes the use of funds for long-term rental apartments, establishing a "firewall" for fund supervision.

Yan Jing, deputy general manager of the network finance department of Agricultural Bank of China and head of digital renminbi, introduced that the smart contract product applies the programmable characteristics of digital renminbi to solve the pain points and difficulties of market entities, which will assist government management, enterprise operations, and innovation on internet platforms. In the future, the smart contract engine launched by Agricultural Bank of China Shenzhen Branch and Huawei Group can support scenario innovation for richer government subsidies, fund supervision, prepaid card consumption, insurance payments, supply chain payments, and other scenarios. (Source link)

Labor Insurance Payment Distribution
In early December 2021, Bank of Communications Hainan Branch, in collaboration with Hainan Wangjiawang Trading Co., Ltd., successfully completed the first smart contract labor insurance payment distribution for a customer through digital renminbi. This is an innovative application scenario of digital renminbi created by the bank and merchants, where 38 Wangjiawang chain supermarkets in Haikou can accept smart contract consumption scenarios for labor insurance payments.
A relevant person in charge of the bank stated that distributing labor insurance payments through digital renminbi smart contracts allows customers to check the remaining balance, usage, validity period, and other information of labor insurance payments at any time, improving safety and customer satisfaction. In addition, digital renminbi achieves programmability through smart contracts, allowing payment transactions to be conducted based on the conditions and rules agreed upon by both parties while ensuring safety and compliance. (Source link)
Photovoltaic Income Settlement
In early January, the first order of digital renminbi smart contracts empowering photovoltaic settlement scenarios was landed. This scenario was jointly developed by State Grid Xiong'an Financial Technology Group Co., Ltd., State Grid Hebei Electric Power Co., Ltd., State Grid International Financial Leasing Co., Ltd. Hebei Branch, and Industrial and Commercial Bank of China Beijing Branch and Hebei Branch.
In the photovoltaic settlement scenario empowered by digital renminbi smart contracts, after the power company settles photovoltaic power generation income for customers, it can pay rent to the equipment leasing company based on the digital renminbi smart contract, while the remaining income is fully enjoyed by the farmers, which safeguards the photovoltaic income of farmers while preventing financial institutions from recovering funds, thus improving settlement efficiency.
As the main bearer of digital renminbi work for State Grid Corporation, State Grid Xiong'an Financial Technology Group Co., Ltd. continuously promotes the application of digital renminbi in other scenarios based on its application in electricity purchase payments. The landing of the digital renminbi smart contract empowering photovoltaic settlement scenario solves problems such as high transaction costs and significant financial risks, expanding the scope of digital renminbi usage. (Source link)
Targeted Subsidies
In late January, Meituan, in collaboration with Bank of China, Agricultural Bank of China, and other designated operating institutions for digital renminbi, launched the "Fight the Pandemic, Assist in Resumption of Work" digital renminbi themed activity in Xi'an, distributing digital renminbi red envelope subsidies loaded with designated smart contracts in the livelihood sector to the public. This is the first application of the digital renminbi smart contract function in targeted subsidies for post-pandemic resumption of work and production, as well as the recovery of livelihood consumption, aiming to achieve precise distribution of subsidy funds in the livelihood sector. (Source link)
More Application Scenarios Expected in the Future
From the above scenarios, it can be seen that the smart contract function of digital renminbi has been applied in many practical scenarios, distributed in Xiong'an, Xi'an, Hainan, Shenzhen, and has helped governments or enterprises solve problems that renminbi could not address before, such as standardizing the actual use of subsidies and ensuring the safety of leasing funds.
It is foreseeable that the smart contract function of digital renminbi will play a greater role in the real economy as digital renminbi becomes more widespread. The research report on digital renminbi released by Anxin Securities also introduced other potential application scenarios for digital renminbi.
According to the report, in the patent "Method and Device for Targeted Use of Digital Currency" from the Central Bank's Digital Currency Research Institute, the application of digital renminbi smart contracts in targeted poverty alleviation is introduced.

Higher-level civil affairs departments can allocate poverty alleviation funds through digital renminbi, setting payment contracts according to the requirements for the use of poverty alleviation funds (such as for medical assistance), which are automatically executed by the digital currency system. The digital currency can only enter and exit through the funding channels specified by the payment contract.
Higher-level civil affairs departments can independently control the subsequent use of poverty alleviation funds, achieving dedicated use and precise control of poverty alleviation funds. In addition, higher-level civil affairs departments can formulate more complex payment contracts to achieve more precise fund usage, such as limiting usage rules to specific groups (those eligible for poverty alleviation assistance), specific industries (only for designated hospitals for medical assistance), and specific rules (whether the payment settlement list meets medical assistance conditions), etc.
In the patent "Payment Methods and Payment Systems for Digital Currency" from the Central Bank's Digital Currency Research Institute, the application of digital renminbi smart contracts in third-party guarantee transactions is introduced.

Currently, in the common situation of e-commerce where buyers and sellers are not present for transactions, a third-party platform is usually provided as a guarantee institution for the transaction process. For example, in Alipay's guarantee payment, the buyer first pays the amount to the third-party Alipay account; then the seller ships the goods; after the buyer receives the goods, the third-party Alipay pays the funds to the buyer, thus solving the seller's credit issue. However, third-party institutions may also have credit risks, and a large amount of funds may be tied up in third-party guarantee institutions, which could lead to financial risks.
Digital renminbi can achieve transactions between buyers and sellers without third-party credit guarantees through smart contracts. Users can specify a smart contract for the payment digital currency, allowing the digital currency system to execute the smart contract and monitor the conditions to complete the transfer of digital currency.
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