WeChat Pay has collaborated with hundreds of financial and payment institutions to further support the application and ecosystem of the digital yuan, China’s central bank digital currency (CBDC), according to an official statement.
This collaboration aims to expand the range of merchants within WeChat where digital yuan can be used. The latest expansion of payment channels would allow millions of merchants in various sectors including tourism sites, museums, utility payment platforms, and logistic companies to use the digital yuan, also called the digital renminbi, the e-RMB, or the e-CNY.
These merchants span life services, household payments, catering and entertainment and transportation, making the usage of digital yuan more convenient and potentially broaden its adoption.
China’s central bank, the People’s Bank of China, was the first to issue a CBDC when the digital yuan underwent public testing in April 2021 after some initial pilot trials. Transactions using the digital yuan hit 1.8 trillion yuan (US$249.33 billion) in June 2023, after slow progress in adoption during the early trials.
An official at the People’s Bank of China recently revealed that the digital yuan pilot program has expanded to 26 trial areas in 17 provinces and cities, according to state media reports.
The Chinese central bank is actively advancing research and innovative applications of cryptographic technology in various business scenarios of the digital yuan, including mobile terminals, software and hardware wallets, offline transactions, smart contracts, and controllable anonymity, says the official.
Consortium chain technology serves as one of the underlying technologies for China’s digital yuan. Consortium chain technology, also known as a federated or semi-decentralized blockchain, is a type of blockchain that operates under the control of a group of organizations or entities rather than being fully decentralized. In a consortium blockchain, a pre-selected group of nodes are given the authority to validate transactions and participate in the consensus process.
The transaction layer of the digital yuan payment system is a centralized architecture used to support high concurrency and low latency. All inter-agency transactions are conducted through the central bank to facilitate value transfer, which means the underlying technology is not a classic decentralized blockchain.
The digital yuan’s technology does utilize certain features of blockchain. Its expression based on encrypted strings has been designed to retain characteristics of blockchain such as security, prevention of double spending, and tamper resistance. It can also incorporate smart contracts with currency-related functions.
In the issuance layer of the digital yuan payment system, a unified distributed ledger is built based on consortium chain technology. The central bank, as a trusted institution, uses application programming interfaces (APIs) to upload transaction data to the blockchain, ensuring the authenticity and accuracy of data. Operational institutions can perform inter-agency reconciliation, collective ledger maintenance, and multi-point backups.
As legal tender with equivalent value with other forms of the Chinese currency, the digital yuan has gradually expanded its applications over the years. It was first tested on a larger scale during the Winter Olympics in Beijing in February 2022, allowing users to make digital yuan transactions at select merchants.
Around the same time, the digital yuan expanded from its original six state-owned banks to including the leading digital payment platforms WeBank (WeChat Pay) and Mybank (Alipay). Users can register two wallets with their real names in the digital yuan app, enabling them to make digital yuan payments using WeChat Pay and Alipay.
WeChat later added a “Digital Yuan Entrance” for users in pilot areas in China, along with the addition of “Digital Yuan QR Code Payment” on its payment page. Since 2023, WeChat has supported the “Wallet Quick Pay” function for digital yuan, allowing users to manage and use their activated digital yuan wallets directly within WeChat. WeChat’s mini-app added support for the digital yuan as well.
Read More: WeChat Pay Expands Digital Yuan Integration Across Millions of Life Services