A senior Chinese finance official has said that the digital renminbi (RMB) will not replace Alipay, WeChat Pay, and bank cards for the next decade.
According to an article posted on the QQ platform, these comments came from Li Lihui, the leader of the Blockchain Working Group of the China Internet Finance Association and the former President of the Bank of China.
Lihui’s remarks were made at a conference during a discussion titled “Digital Currency: From Concept to Reality.” In his words,
“I predict that in at least the next ten years, Alipay, WeChat Pay, and bank cards will still be the main payment tools.”
On the issue of whether a government-controlled digital currency can eventually replace the established players and develop into global digital currency, he said, “I think it will be a process of market decision.”
Although Lihui was conservative in his timeline projections for the digital RMB, he did underscore three key benefits a CBDC could bring. First, cost savings and counterfeit prevention.
Second, the real-time ability to view circulation data and control the monetary supply. And third, the tracking of capital flow to strengthen the control of anti-money laundering, anti-tax evasion, and so on.
Lihui concluded his comments by noting that it was still early in China’s CBDC effort, “at present, my country’s legal digital currency is still in the early stage of technical verification,” and that before it can be widely promoted, “a successful mid-term test is required”.
Irrespective of predictions, the sheer transaction volume on Alipay and WeChat Pay is likely to make them formidable competitors for any other payment system as they currently rank as the top two global mobile payment platforms.
The CBDC Arms Race
According to a frequently cited survey by the Bank for International Settlements (BIS), 80% of central banks have joined the digital currency research and development race. A race in which, according to Binance CEO Changpeng Zhao, China has a significant lead.
Indeed, as China pushes forward with more city-specific tests, its progress has increasingly attracted U.S. officials’ attention.
Just a few days ago, the Washington Examiner reported on a letter that the National Intelligence Director, John Ratcliffe, had recently sent to the Securities and Exchange Commission Chairman, Jay Clayton.
In his correspondence, Ratcliffe reportedly offered to provide Clayton with information on the security issues that stem from China’s work toward digitizing the yuan, i.e. a dominant digital yuan stands to upend the dollar’s status in international finance.
Ratcliffe also urged Clayton to do what he could to maintain the competitiveness of U.S.-based crypto firms, perhaps the latest sign that the race is heating up.