It has just been revealed that China’s central bank officially partnered up with Ant Group, Alibaba Group’s fintech affiliate, to provide support for the development of a technical platform for its sovereign digital currency.
Regarding the development of the digital yuan, China has been going at it since 2014 with the intention to replace some of its circulating cash. The Chinese authorities have said that the e-CNY will initially be used for domestic retail payments before it can really be used overseas.
Ant and China’s central bank will be working side-by-side to promote the development of the e-CNY, based on Ant’s database Ocean Base, and its mobile development platform mPaas.
The bank, Ant and Tencent have been working together for the past three years to develop the digital yuan. The reason behind this sudden disclosure could suggest that both companies were touting their close relations with the regulator, although they have been affected by the government’s rigorous anti-monopoly abolition and investigation.
Francis Lun, CEO of Geo Securities Ltd., reported that Ant was asked by Beijing to hand over its data to a new state-controlled credit scoring company. Ant insisted on leading the company as it remarked that too much government intervention would negatively impact the industry.
However, the regulator disagreed and reasoned that — by complying with Ant’s demand — it would create a conflict of interest.
Ant and Tencent nearly monopolize the entire e-payment market in China, controlling 54% and 40% of the market respectively. Jerry Lin, the director of Taiwan-based Financial Research Institute, remarked that the regulator’s anti-monopoly probe will go easy on these fintech companies due to their collaboration with the central bank.
Lin further said that, unless a competitor is strong enough to control at least one-third of the market shares, their monopoly would be difficult to break up.
Anne Stevenson-Yang, co-founder and research director of J Capital Research, commented that the e-CNY will not be used for the sake of innovation or to compete against the US dollar, but to enable China to supervise the transactions.