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- 1 China aims to use the digital renminbi as the main currency for retail transactions, seamlessly integrated into existing platforms.
- 2 Digital renminbi combines cash characteristics with modern electronic payment technology, which makes it more versatile.
- 3 WeChat and Alipay will gradually adopt digital yuan payments for retail transactions, while wholesale systems will use it for efficiency.
Mu Changchun, the director of the Digital Currency Research Institute of the People’s Bank of China, announced at the “2023 China International Financial Annual Forum” that the digital renminbi, or the digital yuan, should become the primary currency for all retail transactions.
According to his statements at the event, the digital renminbi has undergone a substantial transformation, blending the latest in network and mobile payment technology. It now combines the characteristics of traditional cash – including property rights and anonymity – with the convenience, portability, and traceability of modern electronic payment tools.
This evolution positions the digital renminbi as a versatile payment solution, ideal for the growing digital economy. He claims the Central Bank Digital Currency (CBDC) has what it takes to replace existing payment methods across society.
The Wholesale and Retail Payment Scenario Considerations
The immediate focus of this transformation, as noted by Mu Changchun, is on retail transactions. This includes integrating digital renminbi as the payment method across various platforms, such as WeChat, Alipay, and third-party payment apps. However, there’s a catch – these platforms must adhere to regulations, obtain necessary financial licenses, and operate under governmental supervision.
In the short term, standardizing QR codes and achieving barcode mutual recognition are priorities. Over the long term, comprehensive upgrades to payment tools will be implemented. Importantly, this evolution won’t necessitate changes to the existing business or regulatory models, making for a smooth transition.
The wholesale payment landscape also sees adjustments. Current interbank payment systems and commercial bank intranets that support wholesale payments are considered sufficient and won’t be replaced by the central bank’s digital currency system. Instead, they’ll be integrated and seamlessly connected with digital renminbi.
This move aims to prevent unnecessary resource waste and maintain operational efficiency, particularly for financial market infrastructure not covered before. Digital renminbi will play a role in settlement, with smart contracts facilitating payment versus payment (DVP) and payment delivery (PVP) to enhance wholesale payment efficiency.
The Future of Central Bank Digital Currency in China
This declaration essentially confirms China’s ongoing commitment to developing its central bank digital currency (CBDC), the digital yuan. It aligns with the broader trend of digitalization in the financial sector and the growing importance of digital payment methods in the modern economy.
As China further refines its digital currency infrastructure, wallet providers like WeChat and Alipay will play a pivotal role in facilitating the integration of the digital yuan into various retail scenarios. While specific technical details were not disclosed during Mu Changchun’s speech, this development signifies a significant step towards realizing China’s vision for a digital currency-driven future.
Joseph Alalade is an expert Web3, crypto, and blockchain content writer and journalist. His persevering dedication to learning and understanding these complex subjects has equipped him with the ability to simplify them for any audience. Joseph’s expertise and passion for the industry make him a valuable asset for organizations seeking informative and engaging crypto-related content that drives results.
