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Digital Yuan plans to Work with Alipay & WeChat Not to Compete with them

China’s CBDC i.e., Digital Yuan is aiming to work with local mobile payment apps Alipay and WeChat wallets and not intending to get into any sort of competition. The recent statement published by a media outlet, South China Morning Post citing Mu Changchun’s assertion in a report.

Mu Changchun is the head of China’s central bank (People’s Bank of China) digital currency research institute. Reportedly, in an event co-organized by China Finance 40 Forum in Shanghai at the 2nd Bund Summit on Oct 25th, Changchun clarified a few of the misconceptions for the first time.

According to Changchun, the Digital Currency Electronic Payment (DCEP) or digital yuan/ digital renminbi is not planning to compete with the country’s major mobile payment wallets. Rather, focusing on working together to accelerate the adoption of the nation’s CBDC due to its compatibility with these wallet apps.

Digital yuan is money in the wallet whereas Alipay (owned by Ant Financial) and WeChat (owned by Tencent) are mobile payment wallets. There are no similarities and are working on different dimensions. Said, Changchun

However, eventually, it depends on the citizens whether to use these private mobile wallets or an app that is designed to distribute digital yuan. Said, Wang Leilei, a fintech consultant from Kapronasia– a leading financial technology market research and consulting firm covering payments, banking, capital markets, and blockchain technology.

DCEP/Digital Yuan on the Arrival Phase

China’s home-based digital asset has been in the news since 2019 and so far almost reached the final stage of launching it openly, despite the central bank have repeatedly mentioned that there is no specific date to launch it.

Recently, a major pilot conducted by the People’s Bank of China which involved direct public. In the latest trial, digital yuan distributed in Shenzhen via a specific app.

In a lottery pilot, people were asked to download the app and get the opportunity to grab 10 million digital yuan worth of $1.5 million. The giveaway attracted almost 2 million Chinese applicants who took part in the latest trial for China’s sovereign digital currency project.

However, as per the reports, nearly 47500 people received approx. 200 yuan each worth of $30 which they were asked to spend via 3389 designated merchants as the winning amount is neither transferable nor redeemable in one’s bank account.

Digital Yuan Available via Two Routes

Furthermore, Changchun also showed the concerns of rising crimes on counterfeiting CBDC via different private wallets and stressed the wallet app which is specifically designed for the distribution of digital yuan.

As of now, to mitigate the counterfeit risk of digital yuan, the DCEP is currently available in two modes. “The first involves the central bank, which issues digital yuan. The second involves designated institutions such as commercial banks, which distribute the currency to users.”

While thriving on its mission to launch DCEP almost soon, on Oct 23rd, the People’s Bank of China published a draft law to provide regulatory structure and legitimacy to the project. In the draft, the central authorities mentioned that digital yuan is the sovereign currency of China whether digital or physical form. The draft law for public consultation would be available in November last week.

Keyna in CBDC Race 

China’s personification of its national currency including the arrival of other mushrooming cryptocurrencies significantly ignited the emergence for other nations as well to launch their CBDC and to show cognizance on the foundation of nations’ digital currencies to be in the race of fintech. Meaning, the evolving CBDC landscape is not limited to China’s CBDC. A few more countries are deliberating on the use-cases and correct deployment of CBDC.  

Recently, Kenya promulgated that the Central Bank of Kenya (CBK) is in full swing of exploration and conversing with transnational central banks to comprehend CBDC. 

In Georgetown’s DC Fintech week, Dr. Patrick Njoroge, CBK governor stated that CBK is feeling left out, and it’s time to gear up and start considering Kenya’s CBDC while interacting with other global players “to create our own space.”

Though, according to Njoroge, the concept of a cashless society is still far, and introducing CBDC is raising more concerns on money laundering and illicit financial activities.