Chinese central bank: Digital yuan to be backup for AliPay and WeChat Pay
The two payment services take up 98% of the market, which is why the central bank is looking to its digital currency for financial stability.
The Chinese central bank digital currency (CBDC) will serve as a backup for China’s influential online Crypto Bull payment services AliPay and WeChat Pay, the Chinese central bank has now confirmed.
Mu Changchun, the head of the digital currency research department at the People’s Bank of China (PBoC), explains that the digital yuan is needed to maintain the stability of China’s financial system in case „something happens“ to AliPay or WeChat Pay.
Speaking at an online conference on Thursday, Mu indicated that Alipay and WeChat Pay together take up nearly 98% of China’s online payments market. If the payment services run into trouble, it could have significant consequences for the country’s entire financial system.
„If something happens to them, whether financially or technically, it would have a negative impact on the financial stability of China as a whole. To have a backup for these private payment systems, the central bank needs to provide a central bank digital currency,“ as Mu elaborates.
China’s antitrust agency fined Tencent for failing
Mu’s latest comments come at a time when the Chinese government is stepping up its crackdown on monopolies in the online payments market. Ant Group, which belongs to Alibaba, the operator of AliPay, and Tencent, the operator of WeChat Pay, jointly dominate the market, which is why the authorities have recently taken action against both. In March, for example, China’s antitrust agency fined Tencent for failing to properly report its business acquisitions, while Ant Group was previously denied a US$37 billion IPO because of the sheer size of the company.
In the online conference, Mu also called on the world’s central banks to ensure that their digital currencies do not get in each other’s way. „The central bank digital currency of one central bank should not undermine the ability of another central bank to be able to provide financial stability in its own country,“ Mu said.
As we has previously reported, China continues to expand the reach of the proposed CBDC. In February, for example, it launched a pilot project with Hong Kong, Thailand and the United Arab Emirates to process cross-border CBDC payments. A spokesperson for Hong Kong’s central bank had also announced that the country is still conducting its own pilot project with China, in which payments will be processed via the digital yuan.