While key central bankers in the West such as Jerome Powell and Christine Lagarde seem to be postponing the issue of the central bank’s digital currencies, China continues to make significant progress.
China’s Digital Currency Electronic Payments Project, or DCEP, run by the country’s central bank, continues to attract significant participation in the private sector. Many large companies in the private sector, from tech giants to e-commerce conglomerates, play a key role in the creation of the digital yuan.
DCEP testing continues to expand as well, with many cities running tests through lotteries. Banks such as Agricultural Bank and Industrial Commercial Bank were pioneers in the experimental DCEP protocols that led to the creation of customized wallets for consumers.
Tencent and Ant Group are two major players in the use of the digital yuan.
Among DCEP’s many pilots in China, the absence of Ant Group and Tencent, as well as operators of the country’s two largest electronic payment platforms, AliPay and WeChat Pay, have sparked much speculation. In fact, the digital yuan project has been touted as Beijing’s response to limiting the duopoly supported by the two companies.
Dissatisfaction also intensified in late 2020 after Jack Ma, co-founder of Alibaba, appeared to be out of the public eye after comments described as criticism of Chinese financial regulators. The speech at the Bund Finance Summit in Shanghai in October 2020 accused the billionaire Beijing of stifling innovation and described Chinese banks as collateral.
Ant Group, as a holding company at the end of a $ 37 billion IPO, suddenly halted its IPO plans. Commentators at the time put the disappearance of the “what” and “IPO problem” in comments made during the event.
While Ant Group is still under the supervision of supervisory authorities in China, there have been reports that a financial holding company has been involved in a digital yuan project with a central bank since 2017. In fact, this disclosure means Ma Corporation and the People’s Bank of China (PBoC) . Collaboration on what is now called DCEP years before PBoC officially launches DCEP in 2020.
Furthermore, MYbank, supported by Ant Group, is also one of the financial institutions that tends to introduce the digital yuan. PBoC Cryptocurrency Research Unit uses Ant mobile app development environment to build smartphone apps for DCEP.
Back in February, Tencent-backed MyBank and WeBank were confirmed as participants in the expanded digital yuan tests. WeBank, which is without a doubt the largest digital bank in China with over 200 million customers, has a significant history of using blockchain with a financial institution, and will register the third most technology-related patents in 2019.
Yifan He, CEO of Red Date Technology, a key infrastructure provider in the country’s Blockchain service network, told Cointelegraph: DCEP’s potential to compete with China-based e-payment cores.
“I do not really think DCEP is meant to compete with the Alipay / WeChat board. If the government really wants to shut up, it has many methods. DCEP’s vision is much broader. ”
Among fintechs and bank gatekeepers
From lotteries to shopping festivals, Chinese banks have moved to market the digital yuan for retail adoption in many cities across the country. These experimental operations appear to focus on the use of DCEP and direct interactions with wallets and payment platforms.
However, it can be argued that the digital yuan needs wider application in payments from one company to another, so that it can act as a full-fledged satellite of the central bank’s digital currency with the digital currency of existing securities, as determined by the central bank. E-commerce giant JD.com is one of the few companies testing DCEP for B2B payments.
Earlier in April, the online store announced that it was already using the digital yuan to pay for B2B partnerships, as well as for interbank settlements. It is possible that these types of use cases push the boundaries of DCEP in its current form to the real CBDC.
JD.com also revealed that they have already used the digital yuan to pay salaries since January. The company sponsored several DCEP studies, and invested approximately $ 4.6 million in the second public lottery in Suzhou.
The company is also another example of the important role the private sector plays in promoting DCEP accreditation. In December, the e-commerce giant began accepting the digital yuan as a means of payment.