China is increasing the testing of its digital currency, and its appeal for Ant and Tencent have helped to create an odd dynamic that Alipay now faces. WeChat Pay and Jing Yang are possible rivals Journal

Ant Group spent many months conducting a digital-yuan experiment that involved tens to thousands of employees.

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Qilai Shen/Bloomberg News

HONG KONG – China is asking Ant Group Co., private sector pioneers to help it.

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It will help develop a digital currency backed by the state that could threaten both highly-popular payment networks.

In recent months, the People’s Bank of China has increased the speed of testing its digital Yuan. This puts the WeChat Pay and Alipay operators in an awkward spot. They are forced to participate despite the possibility of losing the vast user base they’ve built over the years. The majority of China’s nearly 1.4 billion inhabitants use one or more of these private mobile payment services.

The PBOC released its first whitepaper on the topic last week. It stated that the e–CNY was being designed primarily for domestic retail payment. China requires payment services that are “more convenient, safer, inclusive, and privacy friendly”, as well as a multi-platform payments infrastructure.

Although the document was 16 pages long, it didn’t name Alipay or WeChat Pay. However, the document noted that cash use in China has declined due to the dominance of these two networks. Alipay was the first to offer digital payment services over a decade ago. WeChat followed suit. The majority of people now rely on mobile payments and have even abandoned cash in big cities.

According to the PBOC, the eCNY will be distributed via both commercial and non-bank payment companies. The PBOC has provided banks with an advantage in digital-yuan pilots by tapping six state-owned creditors in a trial for the eCNY wallets. Ant’s MYbank joined the group, while Tencent’s WeBank was later added. However, the virtual banks are not allowed to conduct full-blown testing like the state-owned banks.

Ant and Tencent consider it risky for them to promote the development of eCNY. But it is even more dangerous to remain on the sidelines,” he said.

Eswar Prasad,

A former chief of the International Monetary Fund’s China division. He said that the companies had no choice but to cooperate with Beijing’s project.

Ant may have some influence along the way and help to design the digital yuan in ways that will not reduce their competitive advantage too much, said Mr. Prasad. Ant spent many months conducting an eCNY trial involving tens or thousands of employees.

This clandestine testing began in late 2013 with senior employees. It grew to include all Chinese citizens working for Ant and its sister companies in February.

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According to sources familiar with the situation, it is. After Ant’s massive initial public offering was canceled in Beijing in November 2020 by Ant (a billionaire), the project started in earnest.

Jack Ma

Some people claimed that the group sought to restore its strained ties with government officials.

Employees used digital wallets embedded within the Alipay app to make purchases using e-CNY in dozens of restaurants, vending machines, and retail shops at two Hangzhou campuses.

Employees were also allowed to withdraw digital yuan from state-owned banks, MYbank or their personal accounts. This was used by them to pay online for services, merchandise and other products at Alibaba-backed retailers and companies.

Some employees are concerned that Beijing may be starting to demolish Ant’s mobile payment system. This is used by over one billion Chinese people. These concerns, combined with Ant’s resolve to continue the testing show that Ant is stuck between two rock walls.

Robert Murray from the Foreign Policy Research Institute, Philadelphia, stated that payments are basically a zero-sum sport and that a successful E-yuan decreases Alipay’s and WeChat Pays dominance.

According to the central bank, the eCNY and the other electronic payment methods complement each other and can be used in different ways. The biggest difference is that the eCNY cannot be legally accepted.

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Because of their “walled gardens”, Alibaba and Tencent built in order to be competitive for Chinese customers, Alipay and WeChat Pay don’t work together. Although the central bank long demanded a national QR-code system that is uniform, both apps codes don’t recognize each other.

The e-CNY will resolve this issue, being both neutral in technology and platform. Existing trials show the e-CNY wallets support both QR codes and the near-field communication technology commonly used in credit cards and public-transportation cards. It can also be used as a standalone app to help level the playing fields between banks and mobile-payment networks.

Ant and MYbank, Ant’s associate bank, “will continue to advance the trial pursuant the overall arrangement of People’s Bank of China,” a Ant spokesperson said. MYbank and Ant Group will continue supporting the development, research, and testing of e-CNY by PBOC.

Tencent president

Martin Lau

On a recent earnings conference, he stated that the digital Yuan would be “very conducive to our overall payment platform and for WeBank.”

According to the whitepaper, the PBOC stated that no timeframe is available for a national rollout. This contradicts previous reports that said the central bank wanted an official launch before the 2022 Winter Olympics.

Now, the trial covers 10 cities as well as locations that are related to Olympic Games. According to the whitepaper, approximately 20.87 Million individual and 3.51 Million corporate eCNY wallets were set up by June. They had conducted 70.75million transactions, worth over the $5 billion equivalent.

Send an email toJing Yang at [email protected]

Copyright (c),2021 Dow Jones & Company, Inc. 87990cbe856818d5eddac44c7b1cdeb8

Published in China Asks Companies to Build a Digital Yuan’, July 26, 2021 print edition.

Publiated Mon, 26 July 2021 at 01:08.53 +0000

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