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HONG KONG — China calls private sector pioneers Ant Group Co. and Tencent Holdings Ltd. to help it develop a state-backed digital currency that threatens the pair’s highly popular payment networks.
The People’s Bank of China has stepped up testing of its digital yuan in recent months, putting the operators of Alipay and WeChat Pay in a difficult position: they have little choice but to participate, despite the risk of erode the huge user bases they have. grown over the years. Most of China’s 1.4 billion people use at least one of the private services to make mobile payments.
Last week, in its first white paper on the subject, the PBOC said that e-CNY was primarily developed for domestic retail payments. He said China needs “more convenient, secure, inclusive and privacy-friendly” payment services and an interoperable payment infrastructure across all platforms.
Although the 16-page document does not mention Alipay and WeChat Pay by name, it does note the decrease in cash use in China, a result of the dominance of the two networks. Since Alipay pioneered digital payments over a decade ago, followed by WeChat, people have come to rely heavily on mobile payments, virtually abandoning cash in some major cities.
The PBOC said the e-CNY will be distributed through licensed commercial banks and non-bank payment companies. It gave banks a head start in its digital yuan pilot projects, by bringing in six government lenders in a trial of e-CNY wallets earlier this year. Ant’s MYbank and Tencent’s WeBank later became participants, but the two virtual banks have so far not been allowed to perform full tests like the public banks have done.
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