Free Transactions: A Hurdle for China’s Digital Currency Adoption?

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The adoption of China’s central bank digital currency (CBDC), known as the digital renminbi (RMB), is said to be facing challenges for not having merchant fees. Unlike payment services like WeChat Pay and Alipay, the digital RMB doesn’t incur transaction fees for merchants, which initially seems beneficial. However, this lack of fees discourages point of sale (POS) equipment manufacturers from adapting their technology to support the digital RMB, leading to a scarcity of compatible POS devices.

It’s been suggested that banks could distribute free POS equipment to merchants. This idea emerged from chat messages on the People’s Daily, a government newspaper. The People’s Bank of China has been said to have acknowledged these suggestions, stating that the digital RMB is in a pilot phase and they are considering feedback, including offering free POS equipment upgrades. For context, typical transaction fees for other mobile payments range from 0.3% to 0.6%, with WeChat Pay and Alipay charging around 0.6% and 0.55%, respectively.

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