China is at the forefront of efforts to revolutionize digital mobile cross-border payment systems. Already, traders on the 21st century digital silk road are sending payments from Hong Kong to the Philippines and Pakistan, among other places, in mere seconds using blockchain-based, cross-border, mobile digital wallets from Chinese tech giants, including Ant Financial’s Alipay and Tencent Holdings Ltd.’s WeChat Pay.
And Alibaba intends to further expand its global cross-border blockchain mobile digital wallet remittance services via nine partnerships.
China’s silent emergence as a leading global force in several areas of the digital economy stems from its large state-owned banks partnerships with prominent Chinese technology companies. For example, in e-commerce, China accounts for more than 40 percent of the value of worldwide e-commerce transactions through its’ internet companies — Alibaba, Baidu and Tencent.
As Chinese consumers switched to using e-commerce, these transactions were paid with mobile payment methods, pushing China ahead as a major global force in mobile payments at a rate significantly faster than the rest of the world.
As a result, mobile payments in China have grown into a $17 trillion market dominated by China’s two biggest tech giants — Ant Financial (formerly known as Alipay), an affiliate of Alibaba and Tencent Holdings which owns WeChat Pay. These two companies collectively have 1.5 billion active mobile payment users.
Ninety-two percent of people in China’s top cities said that they use Ant or WeChat Pay as their primary payment method, which they are able to use overseas while shopping in 110 countries and districts as well. These Chinese tech giants, which are among the world’s most valuable, are likely to lead in the global blockchain cross-border mobile payment race. Because, despite the crypto ban, the Chinese government is encouraging the commercialization of the blockchain at a large scale via local investment firms, technology conglomerates, and government agencies which are undertaking various digital infrastructural and research and development initiatives.
For example, Alibaba and the People’s Bank of China are world’s first and fifth lead in blockchain technology development patent applications. While a patent application doesn’t necessarily lead to a viable product or use case, it provides the owner an advantage by setting barriers for latecomers and signals that an industry-wide ecosystem is emerging.
China’s Ministry of Industry and Information Technology has initiated digital infrastructural projects with the cooperation from China’s three major telecommunications network operators and China’s largest financial services firms to work towards developing a centralized blockchain-based mobile payment system that offers greater transparency and more detailed oversight over cross-border transactions. The country’s technology leaders, Huawei the world’s and China’s largest telecom company and ZTE, are among many other Chinese telecom companies to publicly align with blockchain technology so far.
China’s new mobile blockchain based payment system is a money-laundering concern for American law enforcement agencies. In a report issued at the end of last year, the DEA said in the last eight years, there has been a steady decline in the amount of cash seized throughout the United States, and this could mean that more discreet techniques of moving illicit cash were being employed using China’s digital silk road.
Selva Ozelli, Esq., CPA, pictured above, is an international tax attorney and CPA who frequently writes about tax, legal and accounting issues for Tax Notes and the OECD.