China’s digital yuan will help banks to become more competitive in the payments sector after steadily losing out to popular technology platforms over the years.
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Zedric Cheung and other analysts expect the adoption of e-CNY will help to reinforce banks’ position in the payments systems because it improves data collection ability and broadens their user bases.
China is a largely cashless society due to the popularity of digital payment tools managed by Tencent Holdings Ltd. and Ant Group Co. Ltd. Their dominance has led to spillover effects on banks.
The e-CNY developed by the central bank and is now under trial in a dozen cities adopts a two-tier structure, where the central bank issues the digital currency to authorized commercial banks.
The effort to develop a digital yuan reflects the authorities’ concerns about data concentration among technology companies. PBOC officials have stated the e-CNY provides better protection of privacy and the capability to combat crimes.