China’s government is making efforts to focus its attention on its central bank digital currency (CBDC), which has been in development for more than 6 years. For this, a new shopping festival has been scheduled for May 5 in which six banks and several payment alternatives will participate, but not the most popular ones, such as WeChat and Alipay.
The six institutions authorized to operate with China’s CBDC are incentivizing their clients to download the digital yuan wallet. By doing so, they will be able to participate in the new shopping festival, bypassing the infrastructure of electronic payment giants such as Alipay, owned by Ant Group (a subsidiary of Alibaba), and WeChat Pay, owned by Tencent Holdings, according to a report by Reuters.
The People’s Bank of China (PBoC), on the one hand, publicly assures that the digital yuan will not compete with AliPay or WeChat Pay, but that it intends to offer support in case something happens to the most popular platforms. However, in practice it appears to be different.
What the Chinese government would be looking for by excluding known payment platforms seems to be related to what was revealed by an official involved in the development of the digital yuan. “People will realize that digital payment in yuan is so convenient that they will no longer have to rely on Alipay or WeChat Pay,” said the man who preferred not to mention his name, according to the aforementioned media outlet.
On the other hand, a bank official added that “Big data is wealth, and whoever owns this data will prosper. WeChat and Alipay now have what the government wants to control. ” This suggests that the government seeks to control much of the financial information of citizens that is already in the domain of private payment operators.
Banks included in the China CBDC pilots so far are the Industrial and Commercial Bank, the Agricultural Bank, the Bank of China and the Construction Bank. There are also a number of major applications that have support for the digital yuan, such as Meituan, JD.com, Didi, and Bilibili. However, surprisingly, WeChat or Alipay cannot be linked to the digital yuan, the report adds.
Mu Changchun, director of the PBoC Digital Currency Research Institute, said at an online conference in late March that Alipay and WeChat Pay account for 98% of the mobile payment market in China. From his perspective, this represents a risk for the financial system of that country.
Scholars such as Martin Chorzempa, a researcher at the Peterson Institute for International Economics in Washington, commented last year that it is difficult for China’s financial regulators to force the country’s major payments companies to hand over the data they have collected from their clients, but with the CBDC you can make it possible for the central bank to have more access to them. It will also take away from these payment companies, ”he added.
Bitcoin’s popularity grows in China
While the Chinese government advances with respect to the digital yuan, the citizens of that country have been expressing their preference for bitcoin, which is the counterpart of centralized systems.
An increasing number of the country’s population seems to be turning their attention to the pioneering cryptocurrency. This would have led the electric car company NIO to accept payments in BTC, as announced on Twitter by journalist Wu Blockchain, even though the central bank does not allow cryptocurrency to replace the renminbi, the legal tender in the country.
There has been so much interest that has been aroused around bitcoin that the Chinese government spread messages asking citizens to be skeptical about the price increase that the cryptocurrency is experiencing.
However, things seem to be changing more recently as, as reported by CryptoNews, Li Bo, deputy governor of the People’s Bank of China (PBoC), recognized bitcoin and stablecoins as an investment alternative during the Boao Forum for Asia.
It is the first time that China has recognized the value of assets such as cryptocurrencies, and although for now the PBoC will maintain its current regulations on them, this position could be the prelude to a change of thought and action on the issues of digital asset regulations within of this Asian territory.