China is creating a digital currency that can be used for day-to-day payments. Now a new report claims the People’s Bank of China is trying to initiate an anti-trust investigation against the two firms that dominate this space: Alipay and WeChat Pay.
On July 31, Reuters reported that the PBOC asked the State Council, which handles anti-trust investigations, to investigate the two firms. They are owned by Alibaba and WeChat. Together the two companies control 94% of the digital payments market, with 55% of that going through Alipay.
Digital payments for day-to-day purchases are already the norm in China, with $8 trillion in transactions during the fourth quarter of 2019, Reuters said.
Even if the country sees Alipay and WeChat Pay as competitors—and so far it has treated them as partners in the digital currency initiative—the investigation could more of a way to flex its muscles and reassert control of the digital payments space.
More than currency
China sees its digital yuan as something bigger than a way to pay for things. The digital currency could be deployed outside the country to attack the U.S. dollar’s position as the world’s reserve currency—a fact noted by Bank of England Governor Mark Carney last August.
But it is also a powerful tool for spying—something the PBOC frankly acknowledged back in November after news of the digital yuan being near test-ready broke.
While promising to give “people who demand it anonymity in their transactions,” PBOC head Mu Changchun said “at the same time we will keep the balance between the ‘controllable anonymity’ and anti-money laundering, CTF [counter terrorist financing], and also tax issues, online gambling, and any electronic criminal activities.”
Reuters said this was the first time Chinese regulators have looked at Alipay and WeChat Pay’s dominance of the digital payments space from an anti-trust perspective.
That said, there have been other signs the government is interested in whittling down the two firms’ dominance of the space, making it easier for smaller firms to enter the digital payments business, according to the report. And there are broader moves afoot to strengthen anti-trust laws generally.