Mu Changchun, head of the research institute for digital currency at the People’s Bank of China (PBoC), has revealed that the newly launched digital yuan will function in tandem, rather than in competition with established digital payment services like Alipay and WeChat.
According to him, China’s Digital Currency Electronic Payment (DCEP) operates in a different space to WeChat and Alipay because they are digital wallets, while the digital yuan is money that can be used with such wallets.
Collaboration Instead of Competition
Figures from the consultancy iResearch show that WeChat and Alipay jointly control roughly 94% of China’s vast 3rd party payments market as of Q2 2020. Acknowledging the inefficiency of the digital yuan going up against these behemoths, Changchun said:
“They don’t belong to the same dimension. WeChat and Alipay are wallets, while the digital yuan is the money in the wallet.”
While that statement infers that the digital yuan will be integrated with these 3rd party payment services, the current reality is a bit different. SCMP reports that Wang Leilei, FinTech consultant at Kapronasia, revealed that the digital yuan for now is only available through an app that can be used in place of WeChat or Alipay’s mobile wallets.
According to Wang, the digital yuan’s pilot scheme participants in Shenzhen were required to download an app to receive the DCEP tokens. In her words:
“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.”
China’s CBDC Experiment Goes Full Steam Ahead
BeinCrypto recently reported that China recently launched a trial run for the digital yuan in the tech-heavy urban cluster of Shenzhen, giving out 10 million yuan (~$1.5 million) to 47,500 people, selected randomly from over 1.9 million residents who indicated their interest in taking part.
Speaking at the Shanghai conference, Changchun revealed that the Chinese central bank is prioritizing its centralized supervision of the digital yuan to “resist the erosion of crypto assets and global stablecoins.”
Despite China’s documented antipathy toward cryptocurrencies, Changchun earlier hinted that the PBoC might consider blockchain technology as one of its tools for managing the digital yuan.