China’s Digital Yuan will Work with Alipay and WeChat Pay
China is currently leading the race to develop a Central Bank Digital Currency (CBDC). Nearly every week, there is some little tidbit of information available about the country’s progress and plans for the CBDC. Now, it has been confirmed by officials close to this project that the country will bring the digital yuan to life with the help of two of the largest tech firms in the country. Recently, it was confirmed by People’s Bank of China’s head of the Digital Currency Research Institute, Mu Changchun that the bank will be working with WeChat Pay and Alipay for ensuring their compatibility with the CBDC in development.
Mu spoke to the South China Morning Post (SCMP) and explained that the agency was planning to integrate the digital yuan into the digital wallets of both services, which ensures that citizens using their services will have easy access to the digital asset. Mu also highlighted the differences between both these services and the digital yuan. He stated that they were not part of the same dimension because WeChat Pay and Alipay are essentially wallets while the digital yuan would the money found in these wallets. Since their fields are not overlapping, there is no reason why the CBDC cannot be integrated into these wallet services.
The links between these payment processors and the digital yuan have been shared for a while now. Considering the position they have in the mobile payment industry in China, it seemed logical that they would also be part in the plans of the government. However, when tests of the digital yuan were initiated, things turned out to be a bit different. Since April, the People’s Bank of China has been testing their digital asset. At that time, the companies that it had included in its plans included the Industrial and Commercial Bank of China, Huawei, China Mobile, the China Construction Bank, the Agricultural Bank of China, and China Telecom.
The telecom firms had been given the responsibility of technical development whereas the banking partners had been told to convert some of their deposits into the digital yuan. Some other tech firms had also been brought into the fold by the People’s Bank in August. This included the largest ride-hailing service in the country, Didi Chuxing. Mietuan Dianping, a food delivery service, and the holding company that founded video-sharing service Tik Tok, ByteDance, were also brought in.
This prompted many people to wonder what the government was planning with Alipay and WeChat Pay and why they hadn’t been brought into the fold. It was then reported that the government is planning to curb the influence of both the companies with the digital yuan. Since they hold a combined 90% market share of the mobile payments industry in China, they have a lot of influence. The government hopes to curtail it and wants to provide citizens with a means of conducting transactions that’s just as efficient, efficient and also costs less. Since the People’s Bank of China has also asked the government to open an antitrust investigation into these companies, they were not asked in.
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