China’s digital yuan will co-exist with Alipay, WeChat: PBOC

A Chinese national flag flutters outside the headquarters of the People's Bank of China, the Chinese central bank, in Beijing, April 3, 2014. REUTERS/Petar Kujundzic

China’s central bank said its planned digital currency will co-exist with technology platforms like Ant Group Co.’s Alipay and Tencent Holdings Ltd.’s WeChat Pay, which currently dominate the online payments market.

One of the key reasons for the People’s Bank of China developing its own electronic yuan was to provide a back-up to Alipay and WeChat Pay, which together make up 98% of the mobile payments market, said Mu Changchun, director of the People’s Bank of China’s digital currency research institute. He spoke Thursday during a panel discussion organized by the Bank for International Settlements.

“If there is something bad happens to them, financially or technically, that could bring negative impact on the financial system’s stability in China,” said Mu. “To provide a backup or redundancy for the retail payment system, the central bank has to step up” and provide digital currency services, he said.

The PBOC is already trialing its digital yuan in some parts of the country and could be the first major central bank to issue a virtual currency. Bloomberg Intelligence estimates the e-yuan could slowly erode the dominance of Alipay and WeChat Pay, grabbing about a 9% share of the mobile payments markets in 2025.

Mu said the digital yuan will be rolled out in a market-oriented way and will co-exist with paper notes and mobile payment platforms.

‘Monetary Sovereignty’

He outlined several other reasons for the PBOC creating its own virtual currency: to protect its monetary sovereignty after the popularity of Bitcoin and other cryptocurrencies posed a threat to China’s capital account management; enhancing the efficiency of payments systems; and promoting financial inclusion.

Mu also proposed a set of principles for digital currencies’ cross-border application. Currencies supplied by one central bank shouldn’t impede other central banks’ ability to carry out their mandates for monetary and financial stability, he said. They should also avoid the “dollarization” of digital currency, he said.

He also called for interoperability between central bank digital currency systems and creating a scalable foreign exchange trade platform supported by digital ledger technology.

Speaking at a conference on the weekend, Mu tried to allay concerns around privacy, saying the electronic yuan has the “highest level of privacy protection” compared with existing payment methods. Users’ personal information will not be available to vendors, unlike with other digital payment platforms, he said.

Bloomberg

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In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.