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Sunday, December 29, 2019 5:18:08 PM
By: Zacks Equity Research | December 27, 2019
Tencent Holdings (TCEHY) is reportedly creating a new digital currency team to explore possible new uses of cryptocurrency.
Per a report, the company issued an internal notice informing employees that it was looking for someone to head its new cryptocurrency research unit.
The team will look at ways to use digital currencies on Tencent’s payment platform as well as other possible business applications. The team will also reportedly work on developing China’s digital currency electronic payment (DCEP) pilot project in the city of Shenzhen.
Tencent Holding Ltd. Price and Consensus
New Venture to Boost Growth
The new team is expected to advance Tencent’s payment strategy layout and ensure the long-term development of its payment business.
Notably, Tencent’s WeChat Pay was one of the largest payment processors in the world with 1.15 billion monthly active users at the end of third-quarter 2019.
Tencent has taken an active interest in cryptocurrencies and blockchain technology for some time. In October, the company had announced that it would open a virtual bank to provide financial services, leveraging blockchain technology. Moreover, its existing digital bank, WeBank, became the first technical infrastructure provider for China's national blockchain network.
Tencent’s recent foray is likely to aid it in gaining a foothold in the cryptocurrency market, which per marketstudyreport.com data cited by MarketWatch, is expected to witness CAGR of 11.9% between 2019 and 2025.
Moreover, the People’s Bank of China is reportedly viewing Tencent and Alibaba (BABA) as prospective issuers of digital yuan, China’s first cryptocurrency. This would give them first- mover advantage when the cryptocurrency finally hits the market.
Rising Competition
The expected launch of Facebook’s (FB) Libra and Walmart’s (WMT) Stable Coin could pose a threat to WeChat Pay as it expands outside China.
China’s government is reportedly worried about Libra becoming a private alternative to its digital yuan initiative.
Further, other central banks, including the European Central Bank, South Korea’s Bank of Korea and the Reserve Bank of India, are also reportedly looking into the potential of state-backed stable cryptocurrencies, which could further hurt digital yuan’s prospects outside China.
Zacks Rank
Tencent currently carries a Zacks Rank #4 (Sell).
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