Bank of China Offers Retail Payment Integration for Digital Yuan

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In a significant development in the realm of digital currencies, the director of the Digital Currency Research Institute of the People’s Bank of China, Changchun Mu, has emphasised the necessity for wallet providers to enable payment options for the digital yuan across all retail settings.

Mu made this proclamation during a speech at the annual China International Service Trade Fair. He underscored that the digital yuan has recently undergone substantial upgrades in terms of its organisational structure and business model. Now, the focus shifts towards enhancing payment tools to complement these advancements.

Mu particularly addressed prominent commercial banking apps like WeChat and Alipay, reminding them of their obligation to adhere to regulatory standards. However, the key transformational aspect is centred around retail transactions. The aim is to integrate the digital renminbi, also known as the digital yuan, as the preferred payment method across a wide spectrum of platforms and retail scenarios. However, a crucial caveat is that these platforms must operate within the framework of regulations, secure the necessary financial licences, and operate under governmental supervision.

In the immediate future, the focus is on standardising QR codes and achieving mutual recognition of barcodes. Over the long term, substantial upgrades to payment tools will be implemented. This evolution will maintain existing business and regulatory models, ensuring a seamless transition.

The wholesale payment landscape will also see adjustments. The central bank's digital currency system will not replace current interbank payment systems and commercial bank intranets that support wholesale payments. Instead, they will be integrated and interconnected with the digital renminbi.

This integration aims to prevent unnecessary resource wastage and maintain operational efficiency, particularly within the financial market infrastructure. The digital renminbi will play a pivotal role in settlement, with smart contracts facilitating processes like payment versus payment (DVP) and payment delivery (PVP), ultimately enhancing wholesale payment efficiency.

As China continues to refine its digital currency infrastructure, wallet providers like WeChat and Alipay will be crucial in facilitating the seamless integration of the digital yuan into various retail scenarios. While specific technical details were not disclosed during Changchun's speech, this development signifies a significant step towards realising China's vision for a future powered by digital currency.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash