(Yicai Global) Jan. 13 -- China’s sovereign digital currency, the e-Chinese yuan, has got off to a promising start since it was first piloted two years ago and financial experts at a recent forum said that it could develop into a dominant payment application in the retail sector as it becomes more widely used.

The e-CNY app could grow into a Super App in retail, Chen Longqiang, chief strategy officer of AI Bank, a decentralized lender powered by artificial intelligence, said a sub-forum of the 16th Asian Financial Form chaired by Yang Yudong, editor-in-chief of leading Chinese financial media outlet Yicai, yesterday.

In the two years since the digital yuan has been piloted, there have been CNY100 billion (USD15 billion) of transactions. Although this is far less than the CNY1.3 trillion (USD193.3 billion) in online payments made each day, the experts at the forum all have high hopes for the e-yuan.

The Chinese people are accustomed to making payments online, said Zou Chuanwei, chief economist of Wanxiang Blockchain. It will take time for people to develop the habit of using the e-CNY and to understand its particular advantages. But the e-yuan is an inevitable evolution of the Chinese yuan and there is reason to be optimistic.

The e-yuan will play an important role in new infrastructure, said Wu Zhifeng, director of the Office of Innovation Center of China Development Bank.

In order for banks to play a greater role in the construction of an e-CNY ecosystem, regulators need to allow wider use of the digital yuan, such as in the purchase of financial products, and offer better incentives, Chen said. But more needs to be done to guard against money laundering and other dangers.

Competition

Although the user experience when paying with the digital yuan is very similar to that of other third-party payment tools such as Tencent Holdings’ WeChat Wallet and Ant Group’s Alipay, experts feel that the two forms of payment are not in competition with each other.

The e-yuan is a sovereign digital currency issued by the People’s Bank of China, while Alipay and WeChat are channels through which transactions are carried out between banks and user accounts on the platforms, Zou said. Although there might be some competition in terms as payment options, it is the e-CNY that underpins the network.

While there may be some overlap in terms of payment scenarios, the e-yuan is legal tender backed by the nation, Chen Longqiang said. This is an essential difference from mobile payment platforms.

Offshore Use

Hong Kong became the first region outside the mainland to promote the digital redback in September last year. However, there are some complex challenges in the areas of the currency issuance system and the free transfer of assets, and while it is hoped that the e-yuan will promote connectivity in the Guangdong-Hong Kong-Macao Greater Bay Area, experts do not think it should be freely used in retail.

If the e-CNY becomes widely used in Hong Kong’s retail sector, it could cause complications for the Hong Kong dollar, Zou said. Its use should be encouraged in wholesale in the special administrative region, but not so much in retail.

Editors: Shi Yi, Kim Taylor