PBOC to Accelerate Digital Renminbi Deployment to “Back up” China’s Alipay, WeChat Dominated Payments System

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The head of the Chinese central bank’s digital currency unit has flagged measures to accelerate the use of the Digital Renminbi, in order to supplement the mobile payments platforms upon which China’s economy has become heavily dependent.

Mu Changchun (穆长春), head of the People’s Bank of China Digital Currency Research Institute, said that the Digital Renminbi would co-exist alongside pre-existing payments methods following its full deployment.

“The Digital Renminbi will be launched with the market serving as its guide, and at the same time will co-exist alongside paper currency and mobile payments platforms,” said Mu at the BIS Innovation Summit 2021 on 25 March.

Mu pointed out however, that the Digital Renminbi would serve as an important alternative to the digital payments platforms that have transformed the Chinese economy over the past decade, and now play a critical role in daily commerce.

“If Alipay and WeChat suffer from problems in the areas of technology or finance, this could bring negative impacts to the stability of the Chinese financial system,” Mu said.

“For this reason the central bank must accelerate the pace at which it provides digital currency services, in order to provide a back-up or alternative to retail payments systems.”

Mu also said that the popularity of Bitcoin and other cryptocurrencies was a motivating factor in the development of the Digital Renminbi, as they posed a threat to China’s capital account management.

According to Mu the need to protect monetary sovereignty, raise the efficiency of the payments system and expedite financial inclusion were all factors that spurred the release of the Digital Renminbi.

Mu also called for preventing the “US dollarisation” of digital currency, and for other central banks to achieve interoperability in their digital currency systems.

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