The Central Bank Digital Currency (CBDC) being developed by the People’s Bank of China (PBoC) also known as the Digital Yuan will be allowed to co-exist with existing private-owned payment systems in the country according to Mu Changchun.
As reported by Bloomberg, Changchun, the director of the PBoC’s digital currency research institute noted this while speaking on Thursday during a panel discussion organized by the Bank for International Settlements.
He noted that the development of the Digital Yuan was to help wade off the threats associated with the dominance of the existing payment systems dominated by Alibaba’s backed AliPay and Tencent’s WeChat Pay.
“If there is something bad happens to them, financially or technically, that could bring negative impact on the financial system’s stability in China,” said Mu. “To provide a backup or redundancy for the retail payment system, the central bank has to step up” and provide digital currency services,” he said.
While the early stages of the complete rollout of the Digital Yuan will not naturally subsume the private payment systems, Bloomberg noted that it will gain as much as 9% of the market share by 2025.
The Digital Yuan Testing Goes Mainstream
In complimentary news, Chinese media platforms reported that six Chinese state-owned banks have begun the processing of applications for the Digital Yuan made by members of the public, pushing the trials of the digital Yuan to a more mainstream adoption cycle.
Pilot trials have been conducted in major Chinese cities including Shenzhen, Suzhou, Beijing, and Chengdu but these employed a lottery-based, invite-only model. The banks involved in this exercise include; the Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, Postal Savings Bank of China, and Bank of Communications.
Processing the application for the digital Yuan wallets takes about 24 hours but it comes with no guarantee that all the applications will be approved. If successful, an SMS will be sent to the applicant with instructions on how to download and install the digital Yuan wallets.
Changchun also downplayed the privacy concerns raised about the Digital Yuan noting it is one of the safest and privacy-focused wallets around. According to him, users’ personal information will not be available to vendors, unlike with other digital payment platforms. The People’s Bank of China has not announced any definitive date for the official launch of the Digital Yuan despite the advances in its nationwide trials.