Two private banks in China, MYbank, backed by e-commerce giant Alibaba, and WeBank, a bank backed by Tencent, have joined the Asian nation's pilot tests of the digital yuan ahead of its expected launch next year.
Según un report Shared by Bloomberg, sources close to Alibaba and Tencent said that banks under their backing will join the pilot tests being developed by the Chinese government and the country's Central Bank on their future digital currency CBDC, DCEP or digital yuan. The entities in question are the MYbank, backed by e-commerce giant Alibaba, and webank, an online banking company backed by Tencent. Both companies will bundle their services with the digital yuan app, the report said.
China is apparently determined to test all possible scenarios for the use and implementation of its new digital currency. The integration of the services of these two private banking entities into the DCEP application will allow the new currency to offer the same features and functionalities as commercial banks, which are quite popular in the country.
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Chinese banks and the digital yuan
In addition to China’s central bank, the PboC, the nation has roped in other banking entities to develop its digital yuan, such as the Agricultural Bank of China (AgBank), China Construction Bank (CCB), Bank of China (BoC), and Bank of Communications (BoCom), known as the 4 giants of the banking sector in the country. These banks have been working on building digital wallets to transfer, receive, and make payments in the new currency.
Also, the Postal Savings Bank of China (PSBC) is currently developing an innovative product for the DCEP, which will allow citizens to use their digital currencies easily, quickly and safely.
Bloomberg believes that the introduction of MYbank and WeBank services to the digital yuan could be a setback for the services offered by China's most popular payment networks, Alipay and WeChat Pay, although PboC officials have stated on several occasions that the digital yuan will not compete with these services, as it will be the country's new currency and not just a platform for managing and making payments, as these popular applications are.
DCEP evolution in testing phase
China has been working on developing its future digital currency for about 6 years, but it was last year that it really accelerated its development. Since then, China has been implementing a series of technological innovations to ensure the acceptance and expansion of its currency at all levels.
What for many began as just another digital currency, issued by a central bank, now seems to be a complete payment system, which lives up to its name DCEP (Digital Currency Electronic Payment). With its new digital currency, China seeks to replace the issuance of the physical yuan, and also to internationalize it to become a currency with a presence in global markets. To fulfill this ambitious plan, China has been testing and preparing its DCEP to be suitable for all possible scenarios.
The nation has tested the digital currency in a myriad of environments, ranging from transactions from a virtual wallet, through QR code payments, contactless “Touch” payments, payments without an Internet connection, to purchase-sale operations through ATMs, and the development of hardware wallets in the form of bank cards and biometric hardware wallets, which can even be used to store medical information.
China's central bank has even created a new company in partnership with SWIFT, the global organization for interbank financial communications, which will surely facilitate the arrival of the digital yuan in many corners of the world.
The development of this currency is expected to be completed before the Beijing 2022 Winter Games, to be held in February next year. Its official launch will start a pitched battle by other central banks around the world, which will accelerate their bid to launch a national CBDC to protect their monetary sovereignty. The digital yuan will be the first CBDC developed by a world power.
Continue reading: Postal Savings Bank develops a biometric wallet for the Chinese CBDC
