The operator of WeChat and WeChat Pay platforms, Tencent, a name that claimed about 15% of the Chinese payments market, is taking a significant stride in the spectrum of digital currency. Their recent alliance with the People’s Bank of China (PBoC)’s Central Bank Digital Currency (CBDC) underpins this notion. The venture, also known as Project mBridge, aims at promoting the use of digital yuan and interoperability of CBDC.
Despite being rivals, Tencent and Alipay have collectively dominated the Chinese payments market, bringing forth a digital revolution. Concurrently, however, Tencent has been participating in the PBoC’s digital currency research since 2018, initiating the concept of a multilateral CBDC.
While WeChat Pay and Alipay have shown widespread usage, the digital yuan is still finding its footing, representing a meagre fraction of the total payments market. This dichotomy presents a challenging situation where two powerhouses will have to vie against each other while sharing a common goal.
The PBoC states that the digital yuan and alternatives like WeChat will eventually complement each other, instead of competing. In support, WeChat Pay introduced electronic payment-CBDC interoperability to its platform, an advancement that Tencent soon replicated, allowing users to process e-CNY payments from a range of WeChat platforms.
Tencent now stands as the first private-sector firm to join the mBridge project, signifying a trend that may invite other tech giants to become part of a bigger cause. With the PBoC being more vigilant towards CBDC interoperability and cross-border digital yuan use cases, the strides in the digital currency ecosystem are far from over.
It is interesting to note the timing of this development. Amidst the Asian Games in Hangzhou, showcasing digital yuan on an international platform, the PBoC updated its app to facilitate overseas visitors in opening digital yuan wallets on their mobiles. It’s indeed a step towards nursery expansion, conducting cross-border trials with Hong Kong and Macau and compatibility factors with the digital ruble.
With Tencent planning to enhance its cross-border payment service capabilities and exploring multilateral fund management options through this CBDC “bridge,” the future looks promising. The move is not only a market-changing stride but also a technological revolution, challenging conventional modes of payments and providing alternatives on a global scale. Conversely, one cannot disregard the uncertainties that this new technology venture could bring. Only time will unfold the real face of this digital revolution.
Source: Cryptonews
