![]() So what competition will the digital yuan create for Tencent and Alipay? Consider, why would cChina's merchants and retailers continue to accept money through payment channels like Alipay and WeChat Pay when they will have to pay them merchant fees? The answer is they will wouldnt -p articularly when the convenience and ease of a digital yuan negates the properties of the private cashless payment systems and costs them nothing to accept. He said the central bank “does not charge exchange and circulation service fees from the issuer, and commercial banks do not charge individual customers for digital renminbi exchange and redemption service fees."Īs stated earlier, the digital yuan or DCEP will be considered as legal sovereign tender, and therefore all merchants and retailers will be obligated by law to accept it. The PBOC Deputy Governor highlighted this aspect. Merchants transacting with WeChat and Alipay will however be subject to service fees, which could create a conundrum for the dominate cashless payments methods. The article by Fan Yifei put an emphasis on the digital yuan having the same properties as cash-and using cash incurs no fees. WeChat and Alipay have Fees, DCEP Does not “Other commercial banks and related institutions, undertake the circulation services of digital renminbi under the supervision of the People’s Bank of China and are responsible for the management of retail links, so as to realize the safe and efficient operation of digital renminbi, including payment product design innovation and scenario expansion.” Yifei explained that only some commercial banks will be designated as operating institutions and all other related institutions will have to work through these designated banks. “In order to ensure the security and stability of the digital renminbi system, it is necessary to carefully select a commercial bank with strong capital and technology as the designated operating institution to take the lead in providing digital renminbi exchange services.” In his writings, Fan Yifei clarified by implication that AliPay and WeChat Pay would not be able to provide the public with digital yuan exchange services-stating that current laws only allow commercial banks as DCEP is effectively sovereign cash renminbi (RMB). WeChat and AliPay Can’t Provide DCEP Exchange The deputy governors submission went over much of the same content pertaining to China’s DCEP but there was some new information regarding which financial institutions in China would be able to offer exchange services to citizens for the digital yuan. In an article in China’s Financial News on Sept 15, Fan Yifei wrote in detail about China’s digital yuan development-also known as a Digital Cash Electronic Payment (DCEP) which is the PBOC’s version of a central bank digital currency (CBDC). The Deputy Governor of the People’s Bank of China, Fan Yifei recently discussed China’s digital yuan (DCEP)-indirectly revealing the implications a fee-free digital currency could have on payment giants Alipay and WeChat Pay. "I expect central bank digital currencies to continue to expand around the world," Chorzempa said.Will China’s fee-free digital yuan (DCEP) create competition for Alipay and Tencent’s WeChat pay-who currently dominate the payments sector in China’s already cashless society? Since Facebook first proposed launching the Libra cryptocurrency, now rebranded Diem, there has been a "huge wave of interest" among central banks that are concerned that a private tech company "might take over their currency" in a similar manner to how Alipay and WeChat pay dominate payments in China, he said. "I wouldn't be too worried about the safety of a digital renminbi in a central bank regulated wallet," he added.īeyond China, Sweden is expected to be among the first advanced economies to launch a digital currency, according to the PIIE researcher. Intermediaries that sell the digital currency in China are also expected to be "quite safe and carefully regulated" so long as they are sanctioned by the government, Chorzempa said. "It's designed to have the same value as any regular renminbi, so there should be no price fluctuations to worry about." "I would say the safety levels (of the digital yuan are) very high and the risk is low," he said. To be sure, Chorzempa said China's digital yuan has very little in common with cryptocurrencies such as bitcoin, known for its high price volatility.
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