on the crypto
The suspension of Ant Group's initial public offering (IPO) has generated new speculation on the subject of the Chinese digital yuan. The Chinese government appears to view the payment giant as a destabilizing force for the Chinese economy, and the digital yuan is one way to keep companies like this in check.
The problem of the "shadow economy"
Industry observers say the People's Bank of China could use the digital yuan as part of a larger project to curb the growth of Alipay, WeChat Pay and Yuan Pay App.
Ant's IPO has exposed the flaws in the digital payments industry and China's central bank is motivated to launch the digital yuan and give itself more power to keep third-party payment platforms in check, said Tanvi Ratna, CEO of the fintech Policy 4.0 think tank.
This project has produced an extensive research report on China's national digital currency which will be published on November 18. Shanghai and Hong Kong exchanges suspended Ant's $ 35 billion IPO last week after Chinese financial regulators raised concerns about Ant's micro-lending boom, which could add more debt to the economy already. highly indebted country.
According to the IPO prospectus, only 2% of the loans Ant had facilitated in June were on the balance sheet. One way for the central bank to control Alipay's lending activity is to require the company to convert currencies into digital yuan to take out consumer loans.
The risk of a rise in Chinese debt
Ant's burgeoning lending business has hit the nerves of China's top financial regulators at a time when the country is already battling growing insolvency risks and bank weakness.
To curb the growing influence of fintech giants on the country's economy, Beijing authorities last week proposed a new set of anti-monopoly practices on fintech companies.
"China is very aware of its debt problem," Ratna said. "Ant is facilitating personal loans, many of which could go bad." Alipay has not always been available in reporting data on consumer loans to Chinese banks. The digital yuan can increase transparency and financial efficiency by helping banks better monitor and analyze risky assets, Ratna said.
From banks to mobile banking
The Chinese payment giants also see other threats. Commercial banks in China have lost numerous cash deposits which have shifted to non-bank payment platforms. The Chinese mobile banking market recorded transactions worth around $ 8 trillion in the last three months of 2019, with Alipay taking 55% of the market and WeChat Pay 39%.
The benefits of the digital yuan for Chinese commercial banks extend beyond the increase in cash deposits. With a larger user base, banks will have more transaction data to profile consumers, analyze their online behavior, and experiment with different ways to monetize the data.
