(Yicai Global) May 24 -- China’s sovereign digital currency, still under development, is not intended to be a substitute for US dollars as a global reserve or payment currency, nor is it aimed at replacing existing third-party mobile payment processors, a former governor of the People’s Bank of China said recently.

The development of Digital Currency Electronic Payment is part of the modernization of China’s payment systems, so as to keep pace with the digital economy, improve efficiency, lower costs and in particular serve the retailing sector, Zhou Xiaochuan said at the Tsinghua People’s Bank of China School of Finance Global Finance Forum on May 22.

Statements such as “China’s DCEP cannot substitute US dollars’ leading status in the world no matter how it develops” and the “central bank intends to replace third-party payment systems,” such as Ant Group’s Alipay and Tencent’s WeChat Wallet, through DCEP are not accurate, said Zhou, who is currently honorary dean at the School of Finance and also president of the China Society for Finance and Banking.

The PBOC has enlisted major commercial banks, telecoms operators and third-party payment providers in developing the e-yuan.

“All parties are on the same boat,” Zhou said. "They may sometimes disagree with each other and argue over certain issues, but none can be replaced as they are on the same boat,” he added.

The modernization of the virtual yuan will to some degree help lift the currency’s status abroad and increase its use globally, but it is not expected to greatly increase the internationalization of the currency, which depends more on central government policies and participating institutions rather than technologies, Zhou said.

As pilot schemes of the digital yuan roll out across the country, there has been some concern among the public about users’ privacy with the PBOC being aware of all transactions. Others are concerned that the relative anonymity of the currency will make it a tool for crime.

The payment system will eventually achieve controlled anonymity, which is the balance between protecting users’ privacy and fighting against money laundering, terrorism, drug trafficking and cross-border gambling, Zhou said. In the meantime, the public should not speak ill of the advances being made in the development of the digital currency, he added.

Editors: Xu Wei, Kim Taylor