Huawei is advancing China’s central bank digital currency (CBDC), the digital yuan, by embedding it into its HarmonyOS NEXT operating system. This integration will make digital yuan transactions more accessible to nearly 1 billion smartphone users on Huawei devices.
HarmonyOS NEXT: Huawei’s Third Proprietary Operating System
Released on October 22, 2023, HarmonyOS NEXT (also known as HarmonyOS 5.0) is Huawei’s third operating system and the first developed entirely in-house. Globally, it ranks as the third most popular OS after Android and iOS. Importantly, HarmonyOS NEXT supports applications designed exclusively for its platform.
Huawei began developing HarmonyOS in 2019 after U.S. government restrictions limited its access to Google’s ecosystem. Initially, it launched for smart TVs and wearables. By 2021, it expanded to smartphones, with digital yuan integration already in the works.
Simplified Digital Yuan Access and Expanded Compatibility
With this update, Huawei users can now access digital yuan services without needing a separate app. This change makes the CBDC much more user-friendly. Additionally, new updates will improve wallet management and boost compatibility with other financial apps. Furthermore, Huawei plans to embed the digital yuan in various chips and IoT devices, expanding its use across different platforms.
This integration will also enhance the People’s Bank of China’s ability to secure and monitor digital currency transactions, reinforcing its oversight.
Growing Popularity of the Digital Yuan in China and Beyond
The digital yuan continues to gain traction across China. Recently, it appeared at the 2024 China Science Fiction Conference and Beijing’s Craft Beer Festival, where residents collectively hold around 22.6 million digital yuan wallets.
In an international milestone, the International Air Transport Association (IATA) announced plans to accept digital currencies, selecting the digital yuan as its first option. According to Muhammad Albakri, IATA’s senior vice president, China leads globally in digital currency adoption. By year’s end, the digital yuan will join the 73 other currencies supported by IATA.
China to Amend AML Laws to Address Virtual Asset Risks
China also plans to update its Anti-Money-Laundering (AML) law to better address the growing risks linked to virtual assets. The country’s AML regulations, unchanged for over 17 years, currently lack standards for modern digital assets like Bitcoin.
Andrew Fei, a partner at King & Wood Mallesons in Hong Kong, stressed the importance of these updates as global standards have evolved. The Financial Action Task Force (FATF), a leader in anti-money-laundering, provided extensive guidance for regulating virtual assets in China’s AML law.
The FATF rates China as “largely compliant” with virtual asset-related AML standards. However, China’s ban on cryptocurrency activities exempts it from certain requirements.
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