- The Chinese government is launching a digital Yuan currency.
- Tencent’s WeBank and Alibaba’s MYBank will take part in the trial phase.
- The two will help distribute the currency to the masses.
Alibaba’s operations as well as those of its subsidiaries have come under intense scrutiny in recent months as Chinese authorities seek to rein in their dominance in the country. According to a new report, MYBank, an Ant Group subsidiary is set to take part in a government-backed Yuan digital currency program.
The project will see the firm participate in the distribution of Yuan digital currency processing services nationwide.
China already has a high smartphone user rate with over 700 million users. Chinese citizens are also avid users of online payment platforms accessible using their phones. As such, many of them are accustomed to paying for transport, utility bills, and buying retail items online using their phones.
The trend has boosted online payment systems in the country, with the most dominant of them being under the control of Tencent and Alibaba. There are rumors that the Chinese government is looking to curtail their dominance of the $45 trillion industry by unveiling a Yuan digital currency.
According to the latest announcement, the cryptocurrency will be under the control of the Chinese Central Bank, with private financial firms facilitating its reach.
Apart from MYBank, Tencent’s WeBank is also set to take part in the digital currency distribution.
The digital wallets by WeBank and MYBank and will reportedly have similar functions as those of the six other state-owned lenders that will take part in the trial.
They include the China Construction Bank, the Industrial and Commercial Bank of China, the Bank of China, and the Agricultural Bank of China.
Why it’s a Big Deal for Alibaba
The participation of Alibaba’s MYBank is a good sign for Alibaba investors. It is a ray of hope amidst the current tumultuous relationship between Chinese regulators and the Alibaba empire. In November last year, the Chinese government scraped Alibaba’s plans to launch a $37 billion IPO that would put the company’s valuation at a staggering $300 billion.
According to a Wall Street Journal report, the Chinese government put a halt to the plans after uncovering attempts by the company to obscure the main beneficiaries of the IPO.
China’s President Xi Jinping was apparently worried about Alibaba adding risk to the nation’s financial system.
Investigations by the government apparently found that a group of well-connected players stood to benefit from the offering. They included people connected to powerful political families that are at loggerheads with President Xi and his associates.
They, alongside Alibaba founder Jack Ma and his company’s top brass, stood to gain billions of dollars from the listing. Subsequently, Chinese regulators forced Alibaba to devolve some of its subsidiaries, including Ant Group. In accordance with regulators’ directive, it is restructuring to become a financial holding company under the regulatory oversight of the People’s Bank of China, the nation’s central bank.