The world’s second-largest economy is ramping up efforts to roll out its digital currency to the broader population, as the country’s technology giants like Alibaba and Tencent jump on board. Nonetheless, it won’t be easy to make its digital currency more popular among citizens.
As a reminder, the country’s central bank has been working on digital yuan for several years. The purpose of the digital yuan is to replace cash and coins already in circulation. However, the digital yuan is not a cryptocurrency like bitcoin. The digital yuan is controlled and issued by the central bank.
The digital yuan developed by the country’s central bank is a form of central bank digital currency (CBDC). Apart from the People’s Bank of China, other central banks are also working on similar projects. But the People’s Bank of China is way ahead of its global peers.
This month, it launched an app to allow users in 10 areas, including major cities Shanghai and Beijing, to sign up and use its digital currency.
As stated above, Tencent, as well as Alibaba, support the digital yuan. Several days ago, Tencent announced that its WeChat messaging app would support the digital yuan. Currently, WeChat has more than 1 billion users and is integral to daily in China. Aside from Tencent’s WeChat Pay, Alipay which is run by Alibaba’s affiliate Ant Group is also a partner for the digital yuan.
We shouldn’t forget about challenges as well. The digital yuan has to cope with several issues. One potential issue for the central bank is getting people to download their new digital yuan app and switch from WeChat and Alipay. Thus, integration with WeChat is key and gives the country’s digital currency a potentially huge user base.
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