China’s proposed digital currency will help banks bridge gap on mobile payment, curb dominance of Alipay, WeChat

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With Alipay and WeChat Pay accounting for over 90 per cent of the mobile payment market and drawing away deposits, analysts say PBOC’s proposed digital currency will help banks stem the leak

Banks’ participation in the central bank’s digital currency will help them better compete with third party payment network operators

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People walk past the headquarters of the People’s Bank of China. China’s central bank is close to launching is own sovereign digital currency allowing it to tighten its grip on the nation’s deposit pool. Photo: Reuters

Georgina Lee

Published: 9:00am, 19 Aug 2019Updated: 9:00am, 19 Aug 2019

The People’s Bank of China’s “imminent” move to launch the country’s own sovereign digital currency underlines the central bank’s urgency to tighten its grip on the nation’s deposit pool and help banks catch up with their mobile payment business, analysts said.

The PBOC set up the project in 2014 to look into launching its own digital currency to cut the costs circulating cash and boost policymakers’ control of money supply. Although the project has been closely guarded, various media reports suggest that the central bank’s researchers have been working intensively on the cryptocurrency’s systems for the past year.

Mu Changchun, deputy director of the PBOC’s payment and settlement department, gave more details about the nearly ready digital currency last week at an industry conference in Heilongjiang, saying the PBOC would rely on Chinese commercial banks to be the conversion agency, helping to convert cash in circulation into the PBOC-backed digital currency, and vice versa.

It also signals PBOC’s urgency in launching its own digital currency after Facebook announced details about its Libra cryptocurrency project in mid-June. Global central banks, including the PBOC, have reiterated that Libra must be put under central bank oversight to prevent potential foreign exchange risks and protect the authority of monetary policy.

Mu said that the digital currency “may not necessarily be dependent on blockchain” and will be used only to support small value retail transactions.