China digital currency: e-yuan will ‘reinforce’ banks’ competitive edge in payments, Moody’s says

China is already a largely cashless society, thanks to huge popularity of digital payment tools operated by Tencent Holdings and Ant Group

The digital yuan is being developed by the central bank and now under trial in a dozen cities

1-MIN READ1-MIN

The digital yuan – developed by the central bank and now under trial in a dozen cities – adopts a two-tier structure, where the central bank issues the digital currency to authorised commercial banks, which then exchanges and circulates it to the public. Photo: Xinhua

Published: 4:30pm, 19 Aug 2021Updated: 4:30pm, 19 Aug 2021

China’s digital yuan will help banks become more competitive in the payments sector after steadily losing out to popular technology platforms over the years, according to Moody’s Investors Service.

“We expect adoption of [China’s digital yuan] to help reinforce banks’ position in the payments system because it will enhance their data collection ability and broaden their user bases,” analysts led by Zedric Cheung said in a report on Thursday.

China is already a largely cashless society, thanks to huge popularity of digital payment tools operated by Tencent Holdings and Ant Group.

Their dominance has led to spillover effects on banks, such as more customers moving bank deposits to money market funds run by the tech firms, according to the report.

The digital yuan – developed by the central bank and now under trial in a dozen cities – adopts a two-tier structure, where the central bank issues the digital currency to authorised commercial banks, which then exchanges and circulates it to the public.