Many crypto enthusiasts understand that the Chinese government has been working round the clock on the digital yuan central bank digital currency (CBDC) project. Work has been ongoing for a year now on what is set to be the world’s first state-backed cryptocurrency, and the Chinese government has already solicited participation from several partners.
However, one group of partners appears to have been more critical than most - local tech companies. With an abundance of technology firms, China has fought to become the bedrock of innovation worldwide. Now that it is building what many see as “electronic money,” the country has used its tech firms to improve its standing across the board.
Tech Giants Come Into the Fold
2021 has been the year when tech participation in the CHDB has been most important. However, things started out a tad rough, with many noting the absence of Alipay and WeChatPay - two of the country’s largest digital payment services. Speculation soon began to form that the Chinese government had embarked on the digital yuan project in part to break up the duopoly that both companies had in the Chinese digital finance space.
The rumors grew stronger after Jack Ma, the co-founder of Alibaba (the parent company of Alipay), seemed to withdraw from the public eye. Ma had made comments criticizing the Chinese financial regulators at the Bund Finance Summit in Shanghai back in October 2020. In his speech, the billionaire accused the country’s financial regulators of stifling innovation, while also describing commercial banks as nothing but pawn shops.
Ma’s comments couldn’t have come at a more challenging time. Ant Group, the holding company for Alipay, had been working towards a $37 billion initial public offering (IPO). However, the IPO plans were suddenly shelved, and Ma was no longer seen in public.
Even without participation from Alipay and WeChatPay, the Chinese government already locked up several tech giants to participate in the digital yuan trials. From ride-hailing giant Didi to ByteDance (the parent company of TikTok) and much more, there was significant commitment from the tech sector.
However, this year, the true FinTech giants came into the fold. In February, Bloomberg confirmed that WeBank and MYBank - backed by Tencent and Alibaba, respectively - will join the trials for the digital yuan. People familiar with the development confirmed that the e-wallets from both services will have the same functions as those of the other state-owned digital financial institutions that are participating in the trial.
No More Holding Out
WeBank is China’s top digital banking institution, providing banking services to over 200 million customers as of May 2020. Tencent is the biggest shareholder in the corporation, owning a 30 percent stake. MYBank is also a top online payment bank, focusing more on lending services to small and medium-sized corporations. Jack Ma is its biggest shareholder, with a 30 percent stake too.
Like the participation wasn’t enough, the China Securities Journal reported last week that Alipay itself will allow some of its users to participate in the digital yuan trials. Per the report, the feature is a result of the MYBank participation, and it solidifies the participation of Ant Group in the government’s efforts to digitize the Chinese currency.
In a statement to CNBC, Ant Group confirmed its commitment to the digital yuan effort, saying:
“As one of the participants in the trial of the e-CNY, Ant Group’s associate MYbank will steadily advance the trial pursuant to the overall arrangement of the People’s Bank of China. Ant Group, together with MYbank, will also continue to support the research, development and trial of PBOC’s e-CNY.”
JD.com Coasts Off DIgital Yuan Success
While the focus has been on Alipay and WeChat, several other top tech firms have joined the digital yuan trials. Last month, JD.com, the top e-commerce firm, revealed that it had been using the digital yuan to pay salaries for some employees since January.
Commenting on the journey, the company stated that it had also used the digital yuan in several business-to-business payments to some outfits partner firms, as well as effecting cross-bank settlements with affiliates. The company’s fintech arm, JD Technology, and Digital Currency Research Institute - has been a digital yuan development partner with the People’s Bank of China since last September.
Last December, JD.com started accepting the digital yuan for payments on its platform. In the first week of adoption, the firm got almost 20,000 orders funded in the asset alone.
As of now, there’s still no timeline for the digital yuan’s rollout. The government hasn’t said much about how it plans to launch the asset, leaving more space for speculation. Many believe that a launch will be sometime in 2022, meaning that the government will have more than enough time to continue with tests for its assets across the board.
With Beijing focusing on testing and trials, there is significant anticipation for the digital yuan. It also makes sense, since the asset could kick-start a CBDC craze that will see many countries sporadically move away from paper money.
Nations like France, Japan, and more are already moving swiftly towards the digitized state-backed asset era. With China leading the way, there is little room for error.