Despite the global economic crisis and the aftermath of the corona virus pandemic, the development of China’s national cryptocurrency, the electronic payment of digital currencies, is steadily advancing. The increase in the number of large companies that join the Digital Yuan initiative as a partner in testing and implementing the technology is clear evidence of the progress the project is making in developing it.
Meituan Dianping, the country’s largest wholesale and product delivery platform, is the youngest company to volunteer to help China’s People’s Bank test and implement the initiative. The platform currently has almost 450 million customers and around 6 million companies who use it to sell their products.
Before, DiDi Chuxing, Uber’s Chinese counterpart with a customer base of around 550 million, and the Bilibili streaming platform, which is used by more than 170 million, also participated in tests of China’s national digital currency. Also, Simon Li, Founding partner of Chain capital, Cointelegraph revealed that DiDi will be the first private company in the world to accept central bank payments in digital currency.
What is there for these companies?
The People’s Bank of China started choosing the first traders to test DCEP in April. As reported by Cointelegraph, the list is said to be included mainly retail companies, especially food and beverage like Starbucks and McDonald’s.
The choice behind entities like DiDi, Bilibili and Meituan Dianping can be explained by the fact that their users carry out transactions worth several billion dollars a day. Such volumes They can significantly accelerate popularization and the introduction of a digital yuan.
The total number of customers for the three services combined is more than a billion people not only in China but also in Australia and various countries in South America, according to company statistics. If such a comprehensive approach is chosen, the DCEP could be given test access to a large user segment. These include representatives of large companies in the financial world. As a result, DCEP has exceptional chances of becoming popular in a timely manner.
Also, The companies mentioned will gain a significant competitive advantage if they are the first to introduce such new technology into their products. As infrastructures with a large flow of daily transactions, companies will take the opportunity to make transfers more reliable, cheaper and faster. Experiments have shown that, although in general It takes approximately 45 days to complete a full cycle of letters of credit involving banks from buyers and sellers in different countries. By using blockchain, the process can be reduced to a day or two.
It is still unclear how long the digital yuan trial will take. However, as the number of the largest Chinese companies using this technology is increasing rapidly, it can be assumed that the first test phase is underway.
According to the information available, DCEP tests are already underway in four cities: Shenzhen, Suzhou, Chengdu and Xiong’an. The aim is to test the theoretical reliability, the stability of the system, the functional availability, the convenience of the process, the applicability of scenarios and risk management. It is also the first time that regulators have confirmed the dynamism of the pilot project to convert the digital currency. as explained by Jianing Yu, President of Huobi University.
Before, Four state banks and a number of large companies, including Huawei and the telecommunications giants China Telecom, China Mobile and China Unicom, participated in the test phase. In April, The Agricultural Bank of China also confirmed its participation in the pilot project. However, you may still be far from completing the tests, e.g. Yu In a conversation with Cointelegraph, he remarked:
“We should see that these current tests are still in the research phase and are not preparing for immediate release. According to the latest report, Didi, Meituan, Bilibili and some other internet companies have teamed up with a list of companies and banks to help DC / EP. Meituan and Didi will study the use of digital currencies on the Smart Transport platform. Bilibili’s collaboration has started the stage of technological development. “
Are WeChat and Alipay removed from the list?
Total, So far, more than 20 companies have participated in the digital yuan project. However, It is noteworthy that Alipay and WeChat Pay, the largest payment systems in China, are not on the list of participants. based on information that is available to the public.
The South China Morning Post recently suggested that China introduce the digital yuan as an alternative to Alipay and WeChat Pay. Given that these peer-to-peer payment systems control about 90% of China’s digital payments market and outperform Mastercard and Visa together, It will be interesting to see if they will matter at the start of the CBDC system. The question that most analysts ask themselves The question is whether WeChat and Alipay will become the main providers of digital yuan services or whether they want to compete with the CBDC.
according to Jeff Chu, founding partner of BN Capital, Beijing, is not trying to replace Alipay and WeChat Pay with DCEP. Rather, it is likely that companies are integrated into the DCEP, as he said to Cointelegraph:
“The spread of P2P payments is gradually increasing and usage scenarios have changed from simple transaction payment scenarios to areas such as life travel, entertainment, healthcare and insurance. This type of electronic peer payment software has become an indispensable tool for payment scenarios in China. We have reason to believe that the relationship between CBDC and WeChat and Alipay will be more of a collaboration than a competition. “
Although 90% of contactless payments in China are made through digital platforms, The national cryptocurrency may offer the elements of the financial market that modern electronic payments lack. In a conversation with Cointelegraph, Yu discussed the problems that the DCEP can solve:
“First, the cost of cash in circulation is too high to track. There is a risk of money laundering. Second, the current electronic payment on existing bank accounts is based on tight coupling, which often leads to the loss of personal data protection information and cannot satisfy the public’s request for anonymous payments. “
In other aspects Yu noted that China’s payment platforms such as WeChat Pay and Alipay only cover part of all transaction scenarios, such as customer-to-customer transfers and small payments in the customer-to-business sector. However, Mobile payment systems currently available cannot facilitate situations such as business-to-customer salary payments and handling business transactions. Users with different needs may have qChoose between WeChat and Alipay or CBDC. Yu assumed that in the short term DCEP and third-party payment platforms can coexist. In the long run, however They will gradually merge into a single system.
As China tries to fully digitize its financial industry, Alipay and WeChat Pay may become even more popular as the payment systems of choice after DCEP begins to replace cash payments. Over time, The two platforms can also become important tools for the government to accelerate China’s transformation into a cashless economy. According to another scenario Alipay and WeChat Pay could act as digital yuan service providers. Li off, chain capital, he said to Cointelegraph:
“Although neither Ali nor Tencent have participated in DCEP’s research and development work, DCEP will impact WeChat and the payment. In the future, Alipay and WeChat Pay will play the role of channel or scenario providers, ie functions of the platform such as booking flight tickets, hotels, shopping, etc. “”
Given that Alibaba, the inventor of Alipay, and Tencent, the inventor of WeChat, have previously worked with provincial governments and also at national level on blockchain-related initiatives, they are unlikely to ignore the adoption of the DCEP. Musheer Ahmed, CEO of FinStep Asia, a consulting firm that helps financial technology startups confident that, given the scale of its use in China, the two will become key platforms for the local yuan launch; and said to Cointelegraph:
“The two techfins are an important and integral part of payment transactions. I hope that they are also an important part of local use of the digital yuan. As the digital yuan also helps to further enable cross-border use of the currency, both companies, particularly Alibaba, will play an important role in electronic commerce in OBOR / Digital Silk Road countries. “
The merger can be questioned
It may be too early to look into the future and see how government-to-corporate collaboration can take shape given the emerging blockchain technology and related regulatory issues. It is also unclear whether blockchain, which is used in part by DCEP, can work with a multitude of billions of transactions per day in addition to electronic systems.
Talk to Cointelegraph Olinga Taeed, board member and advisor to the China Electronic Commerce Blockchain Committee, gave full insight into why a large-scale collaboration between WeChat, Alipay and DCEP could be questioned, although WeChat owner Tencent is making its Meituan Dianping platform available to do that To control CBDC:
“As AliPay and WeChat Pay switch to blockchain transaction protocols, they currently consider it insufficient for the volume to manage. Bitcoin, for example, currently has a transaction speed of around 3 per second, but AliPay is around 300,000 per second with a scalability of over one Million, which is planned before the end of the year. “
Taeed also added that the protocols and blockchain architecture are inappropriate, Fifth-generation payment systems like AeMoney, developed by AliPay’s former chief technology officer, Hu Yan, are striving to implement a peer-to-peer system, but mock blockchain as a viable solution. .