In a noteworthy assertion, the chief of a Chinese central bank, Mu Changchun, put forward that the digital yuan could bring about a revolution in retail payments across the nation. The inference drawn from his statement is that this Central Bank Digital Currency (CBDC) could even potentially overshadow cash in the future.
A report by Yicai claimed that Changchun emphasized on the importance of digital yuan being recognized as a feasible mode of payment across all retail scenarios in mainland China. He bade the banking and e-pay provider allies of the People’s Bank of China (PBoC) to optimize their QR Code protocols, signifying a more streamlined structure.
The current scenario witnesses numerous state-run banks and the PBoC playing host to the wallets. Private-sector entities including WeChat Pay and Alipay have incorporated the e-CNY functionality into their respective apps. However, these providers, for the time being, have chosen to adapt the e-CNY payment options with their individual pay interfaces.
This segregation, according to Changchun, can pose IT-related hurdles for the merchants using POS devices. Stressing on the need for a unified, standardized QR code that supports e-CNY along with existing electronic payment methods, Andrew Fei, partner at the Hong Kong law firm King & Wood Mallesons, elucidated that this could work as an incentive for a widespread e-CNY use.
The call for action was not just to the financial institutions that were the bank’s partners but to the retailers as well. Retailers must, as per Jie Hu, Professor at the Shanghai Jiao Tong University’s Advanced Institute of Finance, embrace the idea of e-CNY being recognized as another mode of payment by customers.
In aiming for a digitally-forward society, Changchun envisions a significant reduction in the country’s cash usage or, perhaps, its full termination. He proposed that the commercial electronic payment tools are capable enough to replace cash completely in response to the requirements of the digital economy and society.
Despite this progressive vision, the statement from Kent Matthews, a Professor of Banking and Finance at the UK’s Cardiff University, should be noted. According to Matthews, while it is evident that cash usage has fallen, it still remains impossible for any government to phase out cash legislatively.
Finally, Changchun maintained that the existing inter-bank payment and clearing systems are still suited to China’s economic development, with no immediate need for replacement by the central bank’s digital currency system. The present and future systems, he believes, are interoperable and harmonious, with CBDC smart contracts primed to improve the efficiency of Chinese wholesale payments.
Source: Cryptonews
