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China Seeks to Expand the Use of Its Digital Currency Through WeChat

Cryptocurrency Jan 07, 2022 03:31AM ET
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China Seeks to Expand the Use of Its Digital Currency Through WeChat
 
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  • The digital yuan will be incorporated into the services of its largest messaging application in China, which groups more than one billion users.
  • China wants its digital currency (CBDC) to be circulating throughout the country before the celebration of the Winter Olympics in its capital.
  • The mobile payment apps WeChat and Alipay assure the People’s Bank of China of an early implementation of the digital currency throughout the country.

With the addition of WEChat, China’s largest payment services and messaging app, the government hopes to accelerate the adoption of the digital yuan across the country. If Chinese consumers start using Tencent’s application to make payments, the digital currency will take a big boost and its use may become widespread.

Since 2014, the Chinese authorities have been working on the development of the digital yuan (e-CNY), which has not yet been implemented throughout the country. However, with WeChat, which secures more than 1 billion users, it is likely that the digital currency could become universal.

Although WeChat is used mainly in China, for the Asian giant it is very important to accelerate the use of the digital yuan. Its plans include creating a robust economy fed primarily by Chinese consumers themselves. In this way, China plans to reduce its dependency on the Western market.

The so-called “super application” offering multiple services has deep roots in China; not only for its messaging functions but also for its massive use to make payments through WeChat Pay, order taxis, and buy food with home delivery.

WeChat Pay, WeChat’s digital wallet and mobile payment service with more than 800 million active users each month, enables Chinese consumers to pay for sundries using their phones. The service issues a barcode that is read in physical stores but can also be used to make purchases online.

On the Flipside

  • The incorporation of WeChat is part of a testing process with the digital yuan that the People’s Bank of China (PBOC) has been carrying out.
  • So far, only a few cities in the country have been selected for the use of this central bank currency (CNCB), mainly through national lotteries.
  • Selected cities include Shenzhen, Suzhou, Chengdu, and the capital Beijing, where the People’s Bank of China has awarded some residents with prizes of up to 200 digital yuan to spend as they please.

With these movements, it is clear that the Chinese issuing institute seeks the expansion of its digital currency throughout the country. Although a date has not yet been set to implement the use of the digital yuan nationwide.

The launch of the app for digital payments last week will allow all residents of the 10 selected geographic areas to use the digital yuan. Just download the app and register to use the digital currency. Before, the application was available to certain users with prior invitation.

Why You Should Care

  • Chinese apps WeChat and Alipay, which are run by Ant Group, an Alibaba (NYSE:BABA) subsidiary, dominate mobile payment services.
  • Since last year Alipay has been testing digital yuan payments as well. Both applications will compete with each other for the use of the digital yuan.
  • The Chinese government wants the use of its digital currency to be well advanced during the Beijing Winter Olympics this year.

With the addition of e-CNY to WeChat and Alipay, the PBOC is ensuring that the majority of Chinese people will soon use its digital currency.

“Chinese consumers are so caught up in WeChat Pay and Alipay that it is unrealistic to convince them to switch to a new mobile payment app,” an analyst at consultancy Trivium China, Linghao Bao, told CNBC.

“So it makes sense for the central bank to partner with WeChat Pay and Alipay rather than alone,” he added.

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China Seeks to Expand the Use of Its Digital Currency Through WeChat
 

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