China’s Digital Yuan Must Be Available for Use in All Retail Payments
A senior central bank official emphasized that China’s digital yuan should be accessible for retail payments. According to Mu Changchun, the Director of the Digital Currency Research Institute at the People’s Bank of China, wallet providers such as WeChat, Alipay, commercial banks, and third-party payment apps must comply with the requirements. This requirement aims to promote the widespread adoption of the digital yuan for everyday retail purchases as an initial step towards digital transformation.
Mu delivered this message during a trade forum in Beijing on September 3. He suggested that standardizing QR code practices and ensuring compatibility could be a viable starting point in the short term. Furthermore, he mentioned the gradual evolution of payment methods as part of the long-term plan.
This vision aligns with the PBOC’s commitment to simplify payments through universal QR payment codes. In China, QR code payment systems, primarily driven by WeChat Pay and Alipay, have already gained widespread popularity.
Ongoing Digital Yuan Trials Yet to Spur Nationwide Adoption
The People’s Bank of China has actively conducted trials of the e-CNY, introducing a pilot app in January 2022. These trials have expanded to cover at least 26 locations across 17 provincial-level cities and regions, including major metropolitan areas like Beijing, Shanghai, Shenzhen, and Suzhou. However, despite these ongoing trials, the e-CNY has not yet achieved widespread adoption throughout China.
Enhancing Wholesale Transactions
Mu also emphasized the need to upgrade payment tools for wholesale transactions. He expressed confidence in the existing interbank payment and settlement systems, stating that there is no immediate need to replace them with the CBDC system. He mentioned that the digital renminbi can be fully interoperable with existing electronic payment methods and commercial bank deposits, coexisting harmoniously with them. Additionally, Mu highlighted the role of the digital currency in enhancing the efficiency of large-scale wholesale payments through smart contracts.
Hot Take:
The promotion of China’s digital yuan for retail payments and the ongoing trials demonstrate the country’s commitment to digital transformation. By streamlining payments and enhancing wholesale transactions, the digital yuan has the potential to revolutionize China’s financial market infrastructure. However, achieving widespread adoption and interoperability with existing systems will be crucial for its success.
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