Tencent’s WeBank and Ant Group’s MyBank will be the first two privately owned banks to participate in digital yuan trials, Chinese media reported.
Why it matters: The two online banks will be the first fintech companies to participate in the tests, possibly gaining an edge over their competitors despite widespread speculation that developing the currency was in part to curb their influence.
- The report comes just weeks after Ant Group reportedly reached a deal with Chinese regulators to restructure its operations amid a crackdown on fintech and big tech.
Details: Under the supervision of the People’s Bank of China (PBOC), the two banks are preparing to join trials such as those already underway, which are run by six state-owned banks, China Securities Journal reported citing anonymous sources.
- WeBank and MyBank accounts will soon become available on the digital yuan wallet app, the report said. Much like Ant’s and Tencent’s respective digital payment apps, the e-CNY app works by connecting to different bank accounts and transferring money to the wallet.
- Zhou Xiaochuan, former PBOC governor who spearheaded China’s digital currency efforts during his tenure, stated that Ant and Tencent were involved in digital yuan trials in an op-ed published in Caixin earlier in February, based on a speech he gave in late November.
READ MORE: UPDATED: We got some digital yuan!
Context: Ant Group’s Alipay and Tencent’s WeChat Pay digital payment platforms account for a respective 56% and 38.8% of China’s digital payment market, according to a report from market research firm iResearch. Holding such portions of the market fulfill criteria for the pair to be considered a duopoly, according to draft antitrust rules released by the PBOC in January.
- The digital RMB will enable other players, including traditional banks, to compete with the two fintech giants.
- Ant Group and Tencent each hold around 30% share of their respective licensed digital banks.
- E-commerce giant and Alibaba rival JD.com has been a high-profile participant in the digital RMB trials, even funding a $4.6 million lottery to distribute the currency in Suzhou.
- Some Ant employees in Shanghai have reportedly been participating in digital yuan trials.
Updated: added detail about Zhou Xiaochuan’s statements.