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Participation in the digital yuan test will provide MyBank and WeBank with new opportunities.
Tencent’s WeBank and Ant Group’s MyBank have reached a deal with Chinese regulators to pilot test the China digital yuan. The two join a list of six state-owned banks already enrolled to test the CBDC.
China keeps pushing to launch its CBDC “central bank digital currency.” In the latest development, the government has reportedly partnered with two private banks to pilot test the digital Yuan. China wants to spearhead the shift from fiat to digital currency. As some analysts have pointed out, traditional money has been long overdue for an upgrade. In this race, China has taken 6 years but looks set to finalize it in the next two years.
Ant Group’s MyBank and Tencent’s WeBank are the latest banks to join the project. According to Bloomberg, MYbank’s service is ahead as it will soon be introduced to the People’s Bank of China’s digital yuan app but WeBank will also be introduced soon. This will allow the banks to connect different bank accounts to the central bank’s e-wallets.
In anticipation of the launch, through this deal, the central bank is expanding its coverage and influence. During the launch of the CBDC, the government met some resistance. Some suspect it is after Alipay and WeChat Pay which make up to $45T in the payment industry. The two companies account for 94% of electronic payments in the country. With the government further stepping up regulations on fintech companies, it looks like it cleaning out its competition.
Digital Yuan Scrutiny
The bank has disputed this, explaining it is not in competition with the payment platforms. Additionally, there was concern that the government, notorious for censorship and monitoring citizens, would use the digital Yuan as a surveillance and tracking system. Again, the government has dismissed these claims. According to the government, the primary purposes of the digital yuan is to cut the paper money supply. Another is to get a better handle on the money supply.
For MyBank and WeBank, this will give them an edge. First, it will be ahead in attracting customers to use digital yuan. Additionally, the company will be enveloped in the right regulatory framework.
Upgrading Money through CBDCs
Since the emergence of the digital yuan, the US has been rattled and there have been talks of a digital dollar in 2020, this was a massive trend with the Senate holding meetings to discuss the possibilities of the digital dollar. These have however been just that and nothing is yet to materialize. The same has been true of ‘a digital euro.’ Though there was much talk about upgrading the euro to a digital form, these talks have since phased out.
With China on the verge of a full release, this could be the wake-up call for western countries to step up their development of CBDCs.