WeChat has integrated the digital yuan into its platform, enabling users to pay for goods and services using their Central Bank Digital Currency (CBDC) digital wallets, according to BeInCrypto.
The move from WeChat is yet another push from officials in China to drive up the use of CBDCs. Currently, there are CBDC trial programs taking place in 15 provinces, “with many tens of millions of digital yuan wallets activated.”
While digital currencies aren’t new, there’s still some confusion about how they contrast with other forms of digital payments. Each digital yuan has the equivalent of a serial number, or digital signature associated with it. When consumers in China pay with CBDCs, they’re paying with specific yuan—similar to how if a consumer is using U.S. currency, those specific bills are tracked. This system is different than other digital payments, which use regular analog currency, but are kept track of via digital accounting.
China isn’t the only country rapidly rolling out its digital currency. Four central banks, including the Bank for International Settlements (BIS), in collaboration with the Central Bank of the UAE (CBUAE), People’s Bank of China (PBoC), Hong Kong Monetary Authority (HKMA), and the Bank of Thailand (BoT) included 20 commercial banks to run 164 CBDC transactions from their corporate clients.
What’s more, late last year the Federal Reserve Bank of New York teamed up with the Monetary Authority of Singapore (MAS) to explore the use of wholesale CBDC (wCBDC) for cross-border payments.
CBDCs can potentially make transactions faster and more efficient by eliminating the need for intermediaries and reducing transaction costs. This could be particularly beneficial for cross-border transactions, which can be slow and costly.
For China, one of the positives of CBDCs is the control it gives the country over monetary policy. Cryptocurrencies such as Bitcoin and Ethereum are currently outside the control of central banks. By issuing a digital currency that is backed by a central bank, governments could regain some control over the digital payments landscape.