Tencent, one of China’s leading tech companies and the operator behind WeChat and WeChat Pay platforms, is set to participate in central bank-led digital yuan and Central Bank Digital Currency (CBDC) interoperability pilot programs. WeChatPay, alongside its major competitor Alipay, has established a substantial presence in the Chinese payments market, securing approximately 15% of the market share.
In recent years, Tencent has been aligning its strategies with the People’s Bank of China (PBoC) in support of CBDC adoption initiatives. According to reports via JRJ and Stockstar, Tencent will collaborate closely with the PBoC’s Digital Currency Research Institute on the “multilateral central bank digital currency bridge project,” commonly referred to as Project mBridge.
Project mBridge represents a collaborative international effort, involving not only the PBoC but also the Bank for International Settlements (BIS) and the central banks of Hong Kong and the United Arab Emirates. In 2022, the mBridge prototype successfully conducted “real-value transactions” among 20 commercial banks in four of the participating territories.
However, it’s worth noting that WeChat Pay and the PBoC’s digital yuan are expected to coexist and possibly compete in the payment landscape. While WeChat Pay and Alipay enjoy widespread usage, the digital yuan currently holds a relatively small share of the Chinese payments market. The PBoC has consistently emphasized that the digital yuan and private-sector alternatives like WeChat Pay will eventually complement each other.
In early 2022, WeChat Pay introduced a set of electronic payments-CBDC interoperability options to its platform. In March of the same year, a PBoC digital yuan update allowed Tencent users to make WeChat Pay payments directly from the bank’s official app. Tencent reciprocated by enabling e-CNY payments from various WeChat platforms, including mini-programs, applets, and video accounts.
Tencent’s involvement in the mBridge project places it among the “first batch” of Chinese private-sector companies to join this initiative. This development suggests that other Chinese tech giants may also explore participation in the project in the future.
The PBoC has been increasingly focused on CBDC interoperability and cross-border applications of the digital yuan. Recently, the bank updated its app to enable overseas visitors to create digital yuan wallets on their mobile devices. This aligns with the ongoing Asian Games in Hangzhou, which serves as a significant international showcase for the digital yuan. Additionally, the PBoC is conducting “cross-border” trials with Hong Kong and Macau, and there have been discussions about potential compatibility between the digital ruble and the PBoC’s digital yuan.
Tencent’s involvement in the CBDC bridge is expected to enhance its cross-border payment capabilities and explore opportunities in the financing space. The company also aims to delve into “multi-currency fund management” options for small and medium-sized enterprises. Meanwhile, the BIS has embarked on collaborations with various central banks and private-sector financial firms to develop CBDC interoperability solutions.
