One major reason China is pushing for its digital Yuan is to offer financial stability in case anything happens to WeChat and Alipay. This statement was made by an official of the People Bank of China (PBoC) during an online panel discussion. These retail payment companies handle about 98% of the total mobile payments in China.
Mu Changchun, the head of digital currency research institute at the People’s Bank of China, said if anything goes wrong with Alipay and WeChat, China’s economic stability would be negatively affected. Mu said in order to offer buffer to these retail payment giants, the bank is moving in to provide a central bank digital currency.
These statements are coming in spite of the efforts by the Chinese authorities to mitigate the sharp practices and monopolistic tendencies of these financial giants that control the mobile payment system. Early this month, Tencent was fined by the Chinese antitrust regulator for its failure to disclose to the state their acquisitions.
China: A Trail Blazer in CBDC
China has been steadily rolling out trials of its digital Yuan across several cities, as it transitions into a cashless economy. This is an effort geared towards enabling the Chinese authorities monitor the financial and payment systems across the country. Beijing has also increased its surveillance on the growing fintech system, with the aim of controlling malpractices among the country’s huge online companies.
In the panel discussion, Mu encouraged central banks of other countries to work hand-in-hand to make the CBDC projects mutually compatible across board. He added that the digital currency of one country shouldn’t hamper the ability of the apex bank of the other country to perform its statutory responsibilities.
The Asian country is currently blazing the trail in CBDC. In February this year, the PBoC partnered with the UAE, Hong Kong and Thailand on the possibilities of a multinational CBDC.