(Kitco News) - WeChat, the leading social networking and payment app in China, has announced the addition of the digital yuan to its payment services, according to reports from local media.
The integration of China’s central bank digital currency (CBDC) with its top social networking app was done in an effort to help broaden the appeal of the digital yuan, which has seen lackluster adoption thus far.
With the integration of the digital yuan wallet, WeChat has become the second major payment platform to do so after Alipay added support for the wallet in December. The integration with WeChat enables users to make payments on certain WeChat mini-programs and other platforms, such as ordering food from McDonald’s or paying bills, using the digital yuan. WeChat reportedly has more than 1 billion active monthly users.
The digital yuan, or e-CNY, is currently being piloted in at least 26 Chinese provinces and cities. According to the “Wallet Quick Payment Management” page on the digital yuan pilot wallet, there are 94 merchant platforms that can be accessed, including WeChat.
The addition of support for platforms like Alipay and WeChat comes in response to the muted adoption of the e-CNY as Chinese citizens have opted to continue to use the digital payment apps that they have grown accustomed to, including WeChat and Alipay.
“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,” said Linghao Bao, an analyst at Trivium China, a strategic advisory firm. “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 government is hoping that with this integration, the switch over to using the digital yuan payment infrastructure will go more smoothly and see more uptake. Other efforts to increase the adoption of the e-CNY included the distribution of more than 180 million digital yuan during the recent Chinese Lunar New Year celebration.
The CBDC is also a focal point of conversation at the ongoing Two Sessions parliamentary meetings in China. According to local media reports, on Sunday, Fu Xiguo, an official at China’s central bank and member of the National People’s Congress, proposed giving the digital yuan the same legal status as the physical yuan.
China to establish a new financial regulator
The government of China has revealed its intentions to establish a new financial regulatory body in a move to consolidate oversight and close the loopholes that have arisen as a result of multiple agencies attempting to monitor different aspects of the financial services industry.
As part of the launch of the new regulatory body, its current banking and insurance guardian, the China Banking and Insurance Regulatory Commission (CBIRC), will be disbanded and replaced with the National Financial Regulatory Administration (NFRA), which was presented to China’s parliament during its annual meeting on Tuesday.
The new regulatory agency will be tasked with supervising the financial industry, excluding the securities sector, and will operate under the direct control of the State Council. The government will also set up a bureau responsible for coordinating the sharing and development of data resources, according to a plan submitted to parliament.
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Along with assuming the responsibilities previously managed by the CBIRC, the NFRA will also take over some of the functions previously handled by the People’s Bank of China (PBoC) and the China Securities Regulatory Commission (CSRC).
This development comes as Beijing looks to rein in large corporate and financial institutions that may bring systemic risks via regulatory arbitrage among multiple authorities. As part of the wider government restructuring announced on Tuesday, the Chinese government plans on reducing the number of staff at central-level state institutions by 5%.
A vote on the institutional reform plan is scheduled to take place on Friday. If approved, the new financial regulator is expected to “strengthen institutional supervision, supervision of behaviors and supervision of functions,” according to the plan.
