On Friday, we wrote about China rolling out “aggregate” or unified QR codes for payments that support the digital yuan central bank digital currency (CBDC) as well as Alipay, WeChat Pay and UnionPay QuickPass. This would quickly expand the number of outlets that support the CBDC. Now there are also plans for a Chinese wholesale CBDC.
In a speech yesterday, Mu Changchun, the head of the central bank’s Digital Currency Research Institute, reiterated the QR code change, saying the digital yuan must be available for all retail scenarios.
“What needs to be upgraded is the payment tools used in retail scenarios. That is, using digital renminbi as the payment tool in all retail scenarios,” said Mr Mu. He outlined interoperable and standard QR codes as the first step. “In the long term, we will steadily upgrade payment tools,” although he did not elaborate in what way. However, he said the business models will not change, but payments will become cheaper.
He turned his attention to the potential for a Chinese wholesale CBDC, noting that wholesale does not refer to the payment size but the participants being institutional. “Large-value payments are not necessarily wholesale payments. Micropayments are not necessarily retail payments,” he said.
Mr. Mu does not suggest that interbank payment systems should shift to use wholesale digital yuan. However, he wants wholesale payment systems to become interoperable with the CBDC. And he envisions the digital yuan and smart contracts will be used for securities transactions, enabling settlement on a delivery versus payment (DvP) or payment versus payment (PvP) basis.
As he rightly noted, what amounts to wholesale depends on the participant. We have previously reported that the Chinese authorities have encouraged the usage of the retail digital yuan for corporate and retail securities settlement, such as commodities transactions.