Digital Yuan (e-CNY) is a Yuan digital currency issued by the Central Bank of China. And now, WeChat, China’s leading social networking and payment app, has now integrated the country’s central bank digital currency, the digital yuan, into its payment services.
What is Digital Yuan (e-CNY)?
Digital Yuan (e-CNY) is a Yuan digital currency issued by the Central Bank of China. It is designed to serve as an electronic means of payment for residents and businesses.
If BTC and ETH are decentralized assets managed by the community, Digital Yuan is strictly managed and supervised by the Chinese Government. Digital Yuan is stored in an electronic account and can be used for online and in-person transactions.
Despite its strict stance and strong ban on crypto, especially after the collapse of LUNA/UST, China pioneered the application of blockchain technology and pioneered the creation of CBDCs. After 8 years of establishment and development, the world’s first blockchain-based fiat currency has been warmly welcomed by the Chinese people in the pilot areas, especially during the Covid-19 epidemic. raging and cashless payment solutions are promoted above all.
What is the value of e-CNY?
The e-CNY has the same valuation as the RMB. Unlike many other currencies, the RMB is a fixed exchange rate currency rather than a free-floating currency whose value is determined by the market. The value of the RMB is pegged to currency baskets, such as the China Foreign Exchange Trade System (CFETS) RMB Index, which includes a number of advanced market currencies, including the US dollar and the euro.
How is the digital yuan app different from other mobile payment methods?
Functionally, using the e-CNY will be very similar to using other online payment platforms, such as WeChat Pay and Alipay. In its current design form, the digital yuan app lets users transfer money from their bank account to top up a digital wallet and choose which apps they would like to use the e-CNY for. Alipay and WeChat Pay also have digital wallets and enable online payments of third-party services through their apps.
As a user experience, this is very similar to how WeChat and Alipay work. However, as explained above, the e-CNY is essentially a digital banknote and makes up a portion of the country’s overall cash supply. This means spending the e-CNY is unlike using a bank card or a digital payment platform (tied to a bank account), as the money from these sources comes directly from a savings or checking account.
In other words, when a person tops up their digital wallet from their bank account, they are essentially doing the virtual version of withdrawing cash from an ATM.
In addition, as the e-CNY is technically China’s legal tender, it is illegal for any merchant to refuse this as a payment option. Merchants can, however, choose to refuse other payment options, such as WeChat Pay or Alipay.
WeChat Adds Digital Yuan Payment Functionality
WeChat, China’s leading social networking and payment app, has now integrated the country’s central bank digital currency, the digital yuan (e-CNY), into its payment services. This move comes after Alipay, another leading payment platform, added the same functionality to its platform in December 2022. WeChat’s addition of the digital yuan fast payment function allows users to make payments on certain mini-programs and platforms that support the digital yuan.
The pilot version of the digital yuan application’s “Wallet Quick Payment Management” page currently lists 94 platforms, now including WeChat, that can be accessed. The integration enables WeChat Pay to allow digital yuan payments on certain apps, such as McDonald’s food orders and bill payments. However, users need to authorize the digital yuan wallet operator to sync their WeChat-bound mobile phone number to activate the fast payment function successfully.
According to Linghao Bao, an analyst at Trivium China, a strategic advisory firm, “Chinese consumers are so locked in WeChat Pay and Alipay, it’s not realistic to convince them to switch to a new mobile payment app. So it makes sense for the central bank to team up with WeChat Pay and Alipay as opposed to doing it on its own.”
The e-CNY is being piloted in at least 26 Chinese provinces and cities. The token saw an increase in transaction volumes on Chinese e-commerce platforms during the 2023 Lunar New Year shopping season, helped by e-CNY handouts from authorities.
Alipay had announced its access to the digital yuan acceptance network in December 2022, enabling users to spend digital yuan consumption on platforms served by Alipay, including Taobao, Shanghai Bus, Ele.me, Youbao, Tmall Supermarket, and Hema.
As the digital yuan’s integration with leading payment platforms like WeChat and Alipay grows, it is expected to become more widely adopted in China, potentially challenging existing payment methods like cash and cards. The central bank’s collaboration with these platforms is likely to help broaden the appeal of the digital yuan among Chinese consumers who are already comfortable with these apps.