China’s digital yuan. sometimes referred to as the Digital Currency Electronic Payment (DCEP), is perhaps the most advanced central bank digital currency (CBDC) project run by a major economy thus far.
In the latest development, two privately owned banks, Ant Group’s MyBank and Tencent’s WeBank, were enlisted to participate in the digital yuan trials. These two would be the first modern fintech firms to be allowed to participate in the ongoing trials that began late last year.
Chinese users having WeBank and MyBank accounts will also soon be able to access them through the central bank-run digital yuan wallet app. This news comes only three weeks after Ant Group reportedly reached a deal with regulators to restructure into a financial holding firm. China has been experiencing an ongoing crackdown on fintech and other technology firms..
The inclusion of these private banks is going to help the reach of the digital yuan into a larger section of Chinese users, considering their market share of China’s digital payment market. AntGroup’s Alipay and Tencent’s WePay together hold more than 93% of China’s booming digital payment market. The Economist also called them a duopoly, questioning potential misuses of power.
This move to include the leading private banks within the digital payment markets has quashed all speculations that the People’s Bank of China’s main incentive was to curb the “duopoly” in the payments market that these two banks possess.
They are frontrunners in the rapidly growing payment market that has led to 289% user growth within four years. This boom has gone from 147.2 million users in 2017 to 573.6 million users in 2021. This number is projected to increase to 618 million users by 2025 according to research from Statista.
Although China’s digital yuan trial first began in five provinces, Shenzhen, Suzhou, Xiang’an, Chengdu, and future Olympic locations. The trial is now moving to the major cities as well.
Allegedly there are vending machines in the Shanghai subway station that are now accepting digital RMB payments, indicating that the digital yuan is now in the promotional stage within the city.
These rapid developments have put China in a place to become the first major economy to have a functioning CBDC project as the race for the e-currency ramps up in Asia and around the world.