AliPay Launches Digital Yuan Model For Select Users

According to the latest report from Caixin, there has been a slew of new developments regarding China’s upcoming digital yuan. At the core of these new developments is AliPay, the payments arm of China’s commerce giant Alibaba. Namely, sources within China have found that AliPay has launched its proprietary digital yuan module that supports digital yuan transfers between users. The “digital yuan” module can reportedly be found in a special section of the AliPay test app, right next to the “bank card” section. However, the function is only available to users that have been whitelisted by AliPay.

Registering in the digital yuan module creates a NetShares Digital RMB wallet, which people can use to send and receive the digital currency. A report from Cai Lian News Agency showed that the digital wallet can only support transfers to savings cards of six banks, including ICBC, the Agricultural Bank of China, Bank of China, CCB, Bank of Communications, the Post and Reserve Bank, and the Online Business Bank.

The six banks were part of a select group of financial institutions that make up the so-called “layer 2” of the digital yuan’s distribution. Namely, the digital yuan was envisioned as a two-tier operating system, which means that its production and distribution were split between the People’s Bank of China (PBoC) and other banks. The national bank is tasked with the creation and maintenance of the digital currency, while eight banks, including six of the above-mentioned state banks, are responsible for distributing the digital yuan to the public. In addition to the six state-owned banks, two additional “internet” banks also form the select “layer 2” group—NetShares Bank and WeZhong Bank.

However, reports from sources close to the matter have shown that there is also another layer of the digital yuan’s operating system—layer 2.5. Some industry insiders told Caixin that the layer is made up of institutions that are also considered a “key part” of the digital yuan’s future. These institutions aren’t directly connected to the central bank as the eight large banks are, but are tasked with providing channels for the everyday use of the digital yuan.

“Such institutions include banks other than the eight operating banks, as well as software and hardware scenarios such as Beili Beili, Meituan, Huawei and Lakala, and various software and hardware wallet support institutions,” a source revealed.

Sources also said that a large number of other “layer 2.5” institutions are already actively preparing for the launch of the digital yuan, as they see it as an important opportunity for the future development of their products and services. Chen Lie, the general manager of Lakala Payments, said at the 2021 Investor Conference that third-party payment institutions represented by Lakala are all located in the 2.5-tier service layer for the digital yuan. The company invested more than 30 million yuan in the development of the digital yuan and plans on investing another 500 million in the next three years.