Thank you to Vikram Gopal for this wonderful interview with India’s Business Standard!
This is a beautifully produced video with a great transcript of the Q&A that can be found in the article below and more conveniently below the video:
Business Standard article with Q&A transcription
The breaks in the video correspond to the question numbers in the transcript.
In the video below if you listen to nothing else go to 19:03!
“China’s digital currency is not about buying coffee. Its about bringing further digitization to China. Its about bigger payments like paying salaries or bigger payments. Its really about driving digital payment deeper into society, where WeChat and Alipay were never designed to go.”
Abbreviated Transcript
Q1: Richard, why don’t you start off by sharing what does China’s fintech landscape looks like?
Ans:
>Most people in China don’t use cash, instead, they use payment platforms
>People went cashless in China even before the People’s Bank of China (PBOC) launched its digital currency for trials
Q2: How long has China been experimenting with digital currency, and what does the digital currency looks like in the pilot project?
Ans:
>Works to build the central bank digital currency started in 2014
>Trials for the digital currency started in late August of 2020
>Shenzhen city first used the central bank digital currency (CBDC)
>Even in 2022, most local retailers don’t accept the (under-trial) digital currency in Shanghai
>Around 250 million people have downloaded the app in 12 trial cities
Q3: If I have understood you correctly, right now the CBBC, what it looks like, is essentially a payments wallet.
Ans:
>The central bank digital currency is designed off Alipay and WeChat platforms
> Alipay and WeChat use QR codes to make payments, where the money is stored in a bank or WeChat account
>In the case of central bank digital currency, the money is stored digitally on the phone
Q4: One similarity between China and India is the existence of these fintech firms that have actually become quite big? So, what has been the impact of the CBDC on Alipay and WeChat? Have they lost out?
Ans:
>Amount of transactions carried out during the trial of central bank digital currency (CBDC) is low
>No impact of CBDC on Alipay and WeChat for now
>In the future, the system will impact Alipay and WeChat. But they will coexist in the payment ecosystem
>People will have the choice of payment platforms, like choosing a credit card over other
>Usage will increase if people get salaries in digital currencies
>CBDC, Alipay, WeChat etc are going to be symbiotic in nature and will make digital payments big in China
Q5: Where does crypto fit in all of these?
Ans:
>Cryptocurrencies are banned in China
>Cryptos will coexist with fiat currencies in India and other countries
>If India builds a digital currency that can be transferred from one phone to another without a network (like NFC), it will be groundbreaker
>A central bank digital currency will be helpful in financial inclusion in India
>Mobile technologies that allow offline payment offer tremendous benefits to the rural population
>Central bank digital currencies offer stability, unlike the volatility of cryptocurrencies
Q6: You know, everybody is talking about how crypto itself might not be around for a while. Blockchain technology could form a part of digital currency. Is that the experience of China? Does Blockchain figure anywhere in the architecture?
Ans:
>Blockchain is unsuitable for big countries that need payment systems with high throughput and speed
>Standard credit card networks in the West operate between 50,000 to 70,000 transactions per second
>During big shopping days in China, the Alipay network exceeds 5,00,000 transactions per second
>Fast Blockchain protocols exist, but none of them are ‘bullet-proof’ for a central bank to build on now
Q7: China has toyed with the idea of banning personal QR Codes. Why is this?
Ans:
>China banned personal QR codes that were used for business transactions
>The concept is: If you are running a business, don’t use your personal QR code for business purposes
Q8: If we can zoom out a little, what does China’s experiment with CBDC mean for its economy? And what does it mean for global trade?
Ans:
>Alipay and WeChat is doing a good job about making a payment for coffee
>China’s digital currency is about further digitization of payments in the society, like paying salaries, business expenses etc
Q9: What do you mean when you say that they were not designed to go?
Ans:
>Chinas’s Alipay and WeChat are not designed for companies to make salary payments to employees
>Another use case of central bank digital currency is at the Dalian Commodity Exchange of China
