China’s central bank digital currency (CBDC), also sometimes called DCEP or the digital yuan, is a back-up for the retail payment system and will co-exist with the incumbent traditional payment systems — including private platforms AliPay and WeChat Pay, according to Mu Changchun, director-general of the Digital Currency Institute of the People’s Bank of China.
E-payment giants AliPay and WeChat Pay hold 98% of China’s mobile payment market and have become an important part of the retail payment services sector. “If there’s something bad happens to them, either financially or technically, that will definitely bring a negative impact on the financial stability of China,” said Mu, who was speaking at a panel discussion on “Navigating the uncharted waters of retail CBDC” hosted by the Bank for International Settlements this week.
“So in order to provide a backup or redundancy for the retail payment system, the central bank has to step up and provide CBDC services,” Mu said. The issuance of a retail CBDC will take a market-oriented approach, and “will coexist and cooperate” with paper money and e-wallets including AliPay and Tenpay in the retail payment system, he said.