China’s Central Bank: Digital Yuan Won’t Replace Alipay, WeChat Pay

China’s central bank said that its planned digital yuan will not displace the payment services of the country’s big FinTech companies, including Ant Group’s Alipay and Tencent Holdings’ WeChat Pay.

Mu Changchun, director of the People’s Bank of China’s digital currency research institute, spoke at a panel discussion organized by the Bank for International Settlements (BIS). He added that bitcoin’s popularity had posed at least a partial threat to capital account management, Bloomberg reported.

Changchun noted that the digital yuan could serve as a backup to Alipay and WeChat Pay if they were to experience financial or technical problems — which could potentially affect China’s financial stability. Taken together, the two account for about 98 percent of the country’s mobile payments market.

China’s central bank has been giving away money in the form of digital yuan to test the waters for issuing such a currency. Tests of the digital yuan have been taking place in Shenzhen and Suzhou. The Shenzhen test was expected to be for 20 million digital yuan (about $3.1 million), sent out in red envelopes for citizens to use to make purchases.

Overall, the test programs have been retail-oriented. For example, the Shenzhen test was set to have recipients use the money in more than 3,500 shopping locations. Retailers designated for the pilot were to have a digital currency transaction system ready to use, XinhuaNet reported. The digital yuan trial in Suzhou had Chinese consumers spending their digital currency in such areas as retail, food delivery and ridesharing, PYMNTS reported. Suzhou was a choice location because of its large number of restaurants and businesses.

Fan Yifei, deputy governor of China’s central bank, said at the time that the digital yuan would be akin to legal tender. The report stated that the digital yuan would be issued by the central bank to designated commercial banks. From there, it would be distributed to the public