Tencent joins CBDC interoperability pilot.

Tencent joins CBDC interoperability pilot.

Tencent Partners with Chinese Central Bank in CBDC Interoperability Drive

Source: ShinoStock/Adobe Source: ShinoStock/Adobe

China’s Tencent, the operator of the WeChat and WeChat Pay platforms, has announced its partnership with the People’s Bank of China (PBoC) in advancing central bank digital currency (CBDC) interoperability pilots. Tencent’s WeChatPay, along with its rival Alipay, currently holds a 15% share of the Chinese payments market. Recognizing the potential of CBDC adoption, Tencent has aligned itself with the PBoC’s efforts.

The collaboration between Tencent and the PBoC’s Digital Currency Research Institute involves a multinational initiative known as Project mBridge. The project includes the participation of the PBoC, the Bank for International Settlements (BIS), and the central banks of Hong Kong and the United Arab Emirates. In 2022, the mBridge platform prototype facilitated “real-value transactions” among 20 commercial banks in four regions.

Tencent’s involvement in CBDC technology dates back to 2018 when they began working with the PBoC. However, experts have projected that Tencent’s WeChat Pay and the PBoC’s digital yuan might face competition in the payment sphere. While WeChat Pay and Alipay dominate the market, the digital yuan still represents a fraction of the overall payments landscape. The PBoC has emphasized that the digital yuan and private-sector alternatives like WeChat Pay will eventually complement each other.

To facilitate interoperability, WeChat Pay introduced electronic payments-CBDC options, allowing users to integrate digital yuan transactions into their platform. In March of this year, WeChat Pay users gained the ability to make payments directly from the bank’s official app. In April, Tencent expanded the availability of e-CNY payments across various WeChat platforms, including mini-programs, applets, and video accounts.

A customer uses a commemorative Asian Games-themed digital yuan (CBDC) smart card-type wallet to pay in a store. A customer uses a commemorative Asian Games-themed digital yuan (CBDC) smart card-type wallet to pay in a store: Source: ICBC/Weibo/Screenshot

Tencent is set to become part of the “first batch” of Chinese private-sector firms to participate in the mBridge project. This indicates that other tech giants in China may also join the initiative in the future. The PBoC has recently focused on CBDC interoperability and cross-border digital yuan use cases. This includes allowing overseas visitors to open digital yuan wallets and conducting “cross-border” trials with Hong Kong and Macau. There have even been suggestions that the digital ruble could be compatible with the PBoC’s coin.

Through the mBridge project, Tencent aims to enhance its cross-border payment services and explore financing opportunities. The company plans to leverage the CBDC bridge to support “multi-currency fund management” options for small and medium-sized enterprises (SMEs) as well.

The BIS has also taken steps towards CBDC interoperability by collaborating with central banks and private sector financial firms. These efforts aim to create solutions that enable seamless and efficient communication between different CBDC systems.

Tencent’s partnership with the PBoC for CBDC interoperability is a significant development in the blockchain industry. It showcases the growing importance of CBDCs and the need for collaboration between private sector players and central banks. By leveraging blockchain technology, CBDCs have the potential to revolutionize cross-border payments, enhance financial inclusion, and drive economic growth.

Overall, the mBridge project signifies a step forward in the global adoption of CBDCs. As more countries explore the possibilities of digital currencies, collaboration on interoperability becomes increasingly important. The blockchain industry is poised for further advancements as it continues to shape the future of finance and payments.