The head of digital currency research for the Chinese central bank says that its upcoming statutory digital currency (also referred to as Digital Currency – Electronic Payments, or DC/EP) will not be a “shock” for mobile payments, and will be based upon China’s existing accounts system.
Mu Changchun (穆长春), head of the People’s Bank of China’s (PBOC) Digital Currency Research Institute, said that concerns about the impact of China’s Central Bank Digital Currency (CBDC) on existing payments giants such as Alipay and WeChat Pay are unfounded.
“CBDC will not have an excessively large impact upon existing mobile payments,” said Mu to domestic media.
“It will instead bring a more diverse selection of payments tools to ordinary people, satisfying more of their payments needs.
At present Alipay and WeChat make use of the deposit money of commercial banks for payments.
Once the CBDC is launched, it will in actuality take money in wallets and the depository money of commercial banks and convert it into central bank money…the wallet itself remains unchanged, it’s just that the form and type of the money in the wallet will undergo change.
WeChat and Alipay will continue to provide payments services for ordinary people as a wallet.
Mu also pointed out that the CBDC will take as its foundation the existing bank accounts infrastructure, given that it employs a “two-tier” issuance system.
This involves PBOC first issuing CBDC to designated depository institutions, who in turn exchange it with the public, to support the “loose coupling” function of bank accounts.
“CBDC is a digital form of the renminbi, and is itself not a new currency,” said Mu.
The bank account system is an extremely strict system, and usually requires the submission of a large number of documents and personal information in order to be able to open a bank account.
Under the CBDC system, anything that can form a unique identifier for personal identity can become a bank account.
As long as it can prove your identity it can be used for accounts – for example your license plate number can become a wallet for digital currency, when you make payments on freeways or in carparks.
This is the broader concept of an accounts system.