The People’s Bank of China (PBoC) will integrate its forthcoming digital yuan renminbi into the country’s two dominant mobile payment systems, WeChat Pay and AliPay.
The English-language news outlet South China Morning Post reported on Oct. 26 that on Sunday, Mu Changchun, the head of the research institute for digital currency at the People’s Bank of China, said that the central bank digital currency (CBDC) won’t compete with the two services, which together hold 94% of the market. He said:
“They don’t belong to the same dimension. WeChat and Alipay are wallets, while the digital yuan is the money in the wallet.”
Changchun made his remarks in Shanghai at the second Bund Summit, co-organized by the China Finance 40 Forum. Still, a financial technology consultant at the Shanghai-based financial industry consultancy Kapronasia pointed out that users can use an official CBDC wallet instead of private wallets such as the ones offered by AliPay or WeChat. In other words, he explained that there is at least some degree of competition:
“If the digital money is to be allocated through the app, some people may switch to the app, while others may transfer it to WeChat or Alipay. It depends on consumers and the use case.”
That’s a big step up from the PBOC’s previous position. In July, it asked the State Council, which oversees anti-trust issues to investigate the companies.
China moves closer to CBDC launch
China’s central bank has been working on its digital currency—officially known as Digital Currency/Electronic Payment (DCEP)—for some time now, and in late September the institution announced that the system is ready for its launch.
The bank also clearly stated that China is eager to become the world’s first nation to issue a CBDC in an attempt to internationalize its fiat currency and reduce its reliance on the dollar’s financial infrastructure. Technically, the country was beaten in this race by the tiny Bahamas, which recently just launched its U.S. dollar-pegged CBDC, dubbed the “sand dollar.”
As Modern Consensus reported, the People’s Bank of China has already been testing the digital yuan in Beijing, Hong Kong, Macau, Shenzhen, Suzhou, Chengdu and Xiong’an since August.