In recent news, a member of the PBOC (People’s Bank of China) had announced that the nation’s primary digital currency associated with the central banks would be utilized as a backup for those thoroughly involved in the mobile payment sector industry. These include the likes of Alipay (by Alibaba) as well as WeChat Pay (by Tencent).
Financial Stability to hopefully be ensured through Digital Yuan
The institute of digital currency’s director-general, Mu Changchun, had stated that one of the essential objectives of the national currency’s digitized version would be to make sure that financial stability will be provided and maintained. It will also serve as a sort of safety measure in the situation where both WeChat Pay and Alipay may face any problems.
Furthermore, a panel discussion that had been organized a couple of days ago by the BIS (Bank of International Settlements) had also revealed some important news. Changchun had taken note of the duopoly that was being held by both WeChat Pay and Alipay. He had discovered that both platforms actually constitute 98% of control regarding the digital payments market in China. The official acting on behalf of PBOC, on the other hand, has expressed concerns regarding such huge control and cited the risk of having the nation’s financial system be potentially compromised should either platform face any issues.
In order to resolve this, Changchun stated in a speech that a digital currency backed and provided by the central bank must therefore be set up in order to avoid any potential adverse effects should anything happen to the aforementioned platforms.
Global CBDCs synchronization called for by China
Speaking about other central banks and their CBDC projects, Changchun also suggested apex banks take the initiative and start encouraging interoperability. He further commented that any fund flow and sharing of information should ideally be coordinated and communicated in such a manner that could allow regulators to efficiently ensure compliance through the monitoring of transactions.
As of the time of this writing, the PBOC and the HKMA (Hong Kong Monetary Authority) are making the necessary preparations to test the country’s new digital yuan for the purposes of making payments across borders. Moreover, just earlier this year, central banks in UAE and Thailand had also begun to consider similar payments for central bank digital currencies.