China’s central bank digital currency (CBDC), the ‘digital yuan,’ will give banks an edge after losing ground to fintech platforms in the payments sector, according to Moody’s.
“We expect adoption of e-CNY to help reinforce banks’ position in the payments system because it will enhance their data collection ability and broaden their user bases,” reported analysts led by Zedric Cheung.
Payments in China
The fact that China is leading among CBDC development is consistent with their advanced digital payment culture. Due to the pervasive popularity of digital payments tools operated by Tencent and Ant Group, China has already become a largely cashless society. Their market power has affected the operations of traditional banks, as more customers move their deposits to money market funds run by fintech firms.
The People’s Bank of China (PBOC) has designed a two-tier structure for the digital yuan, currently under trial in a dozen Chinese cities. First, the central bank issues the digital currency to authorized commercial banks, much like fiat currency. These authorized commercial banks then exchange and circulate the digital yuan, also known as the e-CNY, to the public. For instance, China Merchants Bank Co. Ltd. became the latest official distributor, in addition to six state-owned banks and virtual banks backed by Ant and Tencent.
State-sponsored blockchain
According to Moody’s analysts, developing the digital yuan, “reflects the authorities’ concerns about data concentration among technology companies.” The PBOC believes the e-CNY offers better privacy protection and the capacity to combat crimes.
This concern about private technology companies has also contributed to Chinese authorities’ crackdown on cryptocurrency trading and mining. Although skeptical of privately-issued cryptocurrencies, China aspires to become the most advanced global blockchain power by 2025. One of the ways it hopes to achieve this is by integrating it into key industries, naturally payments, for instance.
For instance, after banning financial institutions from dealing with crypto-based companies, the PBOC reiterated this to Alipay, among select others. Now, however, with the backing of the Sichuan provincial government, Alipay’s parent company Alibaba is offering NFTs on its online auction platform. It appears that companies can offer crypto-related services, as long as they advance the goals of the state.
Disclaimer
In adherence to the Trust Project guidelines, BeInCrypto is committed to unbiased, transparent reporting. This news article aims to provide accurate, timely information. However, readers are advised to verify facts independently and consult with a professional before making any decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.
