China's central bank and Ant Group, the financial technology affiliate of Alibaba Group Holdings Ltd., will work together to create an application for the People's Bank of China's sovereign virtual currency, China's state news media says.
China wants to adopt blockchain technology to build its digital infrastructure and accelerate the development of its own virtual currency, according to analysts.
The digital currency research institute of the PBOC and Ant Group will develop the digital yuan on Ant Group's relational database OceanBase and Alibaba's mobile service application, Global Times reported.
Ant Group has been working on the project since 2017, a report in the South China Morning Post said. The SCMP is owned by Alibaba.
Ant Group-backed MYBank was selected as an intermediary to distribute the electronic yuan in late 2017. The PBOC has worked with Tencent Holdings Ltd. over the past three years to jointly develop the digital yuan, the report added.
China's central bank employed Ant Group in June 2019 to build applications consumers could use to send and receive payments using the PBOC's virtual yuan.
Analysts said the PBOC needed the backing of local financial technology companies and retailers to build a digital foundation - including distribution of virtual yuan in cities like Shanghai, Shenzhen and Beijing.
Analysts said the growing adoption of cryptocurrencies for investment may boost interest in China's financial technology market - including its sovereign digital currency electronic payments system.
Cryptocurrency fundraising and trading applications are banned in China. But citizens are permitted to hold cryptocurrencies and bitcoin mining is allowed - and thrives in China.
Meanwhile, some view China's digitalization of its currency as a threat to the U.S. dollar's dominance as the world's No. 1 reserve currency, Voice of America news said.