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An important statement has been made regarding China’s digital yuan, the Central Bank Digital Currency (CBDC) currently in the trial phase. Changchun Mu, the head of the digital currency research institute of the People’s Bank of China (PBOC), stated on September 3rd that the digital yuan (e-CNY) should be available in all individual payment scenarios.
Using QR Code Standards in the Payment Process
According to local media The Paper, Changchun Mu, the head of the PBOC’s digital currency research institute, stated at a trade forum in Beijing that wallet providers, including WeChat, Alipay, commercial banks with mobile banking applications, and e-CNY operators, need to be careful about compliance requirements and obtain relevant financial licenses.
Mu stated, “The first step in the upgrade process is to use e-CNY as a payment tool for all individual scenarios. In the short term, we can start by unifying QR code standards at a technical level to ensure the interoperability of barcodes. In the long term, we will steadily implement the upgrade of payment tools.”
Mu’s remarks came after the central bank promised to promote the widespread use of universal QR payment codes that enable consumers to make payments by scanning a unified barcode last year. The use of QR code-based payment systems, dominated by WeChat Pay and Alipay, is currently widespread in China, and it is also aimed to be widely used for e-CNY.
PBOC has been testing e-CNY for a while and most recently launched a pilot program in January 2022. According to state media Xinhua, as of April, since the beginning of the pilot studies of e-CNY at the end of 2019, PBOC has expanded the trial of the digital yuan to at least 26 locations in 17 provincial-level cities and regions, including Beijing, Shanghai, Shenzhen, and Suzhou. However, e-CNY, which is currently being tested in pilot areas across China, is far from being widely adopted.
Increasing Wholesale Payment Efficiency
Mu also stated that the existing interbank payment and settlement systems work well and there is no need to replace them with the CBDC system. Mu said, “However, it is possible to achieve a smooth integration by providing comprehensive interoperability between e-CNY, existing electronic payment tools, and commercial bank deposits. At the wholesale level, e-CNY can be used for settlement as part of the financial market infrastructure, and smart contracts can be used for payment against delivery and payment against payment, thereby increasing wholesale payment efficiency.”
