JD.com has begun paying some staff with a new government-backed digital currency as a number of China’s major companies begin promoting the ‘digital yuan’.
The state-backed digital yuan, a digital version of the country’s national currency, is quietly being promoted by the country’s largest banks and tech companies in Shanghai ahead of a shopping festival on May 5.
The digital yuan, also called the ‘e-CNY’, is being pushed by six of the country’s largest banks who have encouraged both merchants and retail clients to download digital wallets so that digital transactions can take place, laying the groundwork for a widespread rollout of the currency.
JD.com already allows merchants and shoppers to pay using digital wallets and is taking the e-CNY’s adoption to the next level by paying a number of its staff directly in the new currency.
The state-backed e-CNY is thought to present a major challenge to Alibaba’s ubiquitous ‘Alipay’ and Tencent’s ‘WeChat Pay’, which currently represent around 94 per cent of online payments in China.
It comes as the Chinese government continues its relentless crackdown on dominant tech companies like Alibaba, which was recently hit by a record corporate find of $2.8 billion by Chinese regulators.
“People will realize that digital yuan payment is so convenient that they don’t have to rely on Alipay or WeChat Pay anymore,” a bank official involved in its Shanghai trial said.
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While the People’s Bank of China (PBOC) says the e-CNY is not designed to compete with AliPay or WeChat, it will not integrate with either system and many believe it has been designed to undercut the duopoly.
China’s rollout of a digital currency is years ahead of other countries toying with the idea of ‘stablecoins’, or electronic cryptocurrencies tied to real assets to avoid wild fluctuations in value.
Last week, chancellor Rishi Sunak launched a new taskforce to explore a ‘central bank digital currency’ (CBDC) or ‘Britcoin’ in the UK.
Britcoin would be underpinned by the same blockchain technology used by currencies like Bitcoin and Etherium, but tied to the pound sterling and always worth the same amount as physical cash.
According to the Bank of England, Britcoin would “be introduced alongside – rather than replacing – cash and bank deposits”.