The new Chinese digital currency will seek to dilute the oligopoly of digital payments formed between Alibaba and Tencent
The Chinese government is making leaps and bounds on its central bank’s (CBDC) digital currency project, also known as the digital yuan. According to the latest reports, the applications of the new Chinese digital asset could target the private sector, particularly large technology companies that dominate the local scene.
The electronic payment system of digital currencies (DCEP) developed by China, would aim to “dilute” the dominance of the market by companies such as Tencent or Alibaba, according to a report prepared by the Financial Times.
Both companies have become in recent years two important players of the Asian giant, not only in its field of technological development but in the economic scenario. The multiple concessions with both companies by the people’s Bank of China have favoured a marked dominance of the market.
Pressure from commercial banks – and the implicit danger that any company will grow at a steep pace to the detriment of competition – would be pushing the Chinese Central bank to put a brake. In this sense, the new digital yuan could be a useful tool to slow down the dominance of online payment services of companies (Alipay and WeChat) and ensure a fairer ground in terms of competitiveness.
“They want a more level playing field for the banks. Retail payments are so dominated by Alibaba and Tencent, while banks are less active in electronic payments” ” said a senior official of the Hong Kong Monetary Authority (HKMA).