Huawei Integrates the Digital Yuan into HarmonyOS NEXT
Huawei is set to incorporate China’s digital yuan, a central bank digital currency (CBDC), into its latest operating system, HarmonyOS NEXT. This strategic integration aims to enhance accessibility for approximately 1 billion smartphone users, simplifying their ability to utilize the digital yuan across Huawei devices. The official unveiling of HarmonyOS NEXT, also known as HarmonyOS 5.0, took place on October 22, 2023.
HarmonyOS NEXT: A New Era for Huawei
HarmonyOS NEXT is noteworthy as it marks Huawei’s third operating system and represents the company’s first development entirely conducted in-house. Today, HarmonyOS ranks as the third most widely used operating system globally, coming in behind only Android and iOS. This new iteration is tailored to support applications that have been specifically designed for the HarmonyOS environment, setting it apart from its previous versions.
The impetus for developing HarmonyOS stemmed from restrictions imposed on Huawei by the U.S. government in 2019, which prompted the company to innovate independently of Google’s ecosystem. Initially, HarmonyOS was rolled out for smart TVs and wearable devices, but it began to penetrate the smartphone market in 2021, with plans for digital yuan integration already in consideration.
Simplifying Digital Yuan Transactions
The integration of the digital yuan within HarmonyOS NEXT streamlines user experiences by eliminating the need for a separate digital yuan application. This user-friendly approach is designed to enhance wallet management and ensure interoperability with other financial applications. Furthermore, there are plans underway to embed the digital yuan function into various chips and Internet of Things (IoT) devices, significantly expanding its applicability across a multitude of platforms.
In addition to benefiting users, this integration is expected to bolster security and monitoring for the People’s Bank of China, reinforcing its capabilities in overseeing digital currency transactions.
Recent Developments in the Digital Yuan’s Adoption
The digital yuan has been gradually gaining traction and was recently highlighted at notable events such as the 2024 China Science Fiction Conference and the Craft Beer Festival in Beijing. Currently, local residents hold nearly 22.6 million digital yuan wallets, indicating a significant awareness and uptake of the digital currency.
A noteworthy development for the digital yuan in the international arena occurred on October 29, when the International Air Transport Association (IATA) announced that it will start accepting digital currencies, with the digital yuan as the first option. According to Mohammed Albakri, IATA’s senior vice president, “China is one of the most advanced countries in the world in the adoption of digital currency.” This integration will position the digital yuan as the 74th currency processed by IATA, with preparations for its incorporation expected to be completed by the end of this year.
China’s Regulatory Framework for Virtual Assets
In 2023, China revealed plans to revise its long-standing Anti-Money-Laundering (AML) law to better address the rising risks associated with virtual assets. The current AML legislation has remained largely unchanged for over 17 years, failing to account for the emergence of cryptocurrencies such as Bitcoin.
Andrew Fei, a partner at the law firm King & Wood Mallesons in Hong Kong, stressed the importance of updating China’s AML law in light of the significant evolution of international standards and best practices regarding virtual assets. The Financial Action Task Force (FATF), which works to combat money laundering and terrorist financing, has provided comprehensive recommendations for addressing virtual assets in the proposed AML law amendments.
While the FATF has classified mainland China as “largely compliant” with recommendations related to virtual assets, the country’s prohibition of cryptocurrency activities has led to its exemption from several criteria, indicating room for improvement in its regulatory framework.