China Initiated First Cross-Border Digital Yuan Transaction

The Bank of China’s Shanghai Branch completed the first cross-border digital yuan (RMB) transaction on Tuesday. Local papers reported that the transaction occurred in partnership with the Shanghai Gold Exchange to complete a 100 million yuan settlement in a precious metal.

With China’s central bank digital currency (CBDC) retail pilot at scale domestically, this is the debut of international digital RMB payments.

China digitally settled commodity payments

Local papers report that the transaction was facilitated through a collaboration between the Bank of China Shanghai Branch and its RMB Trading Business Headquarters, along with BOC Hong Kong.

The Shanghai Branch’s spokesperson highlighted the synergy between the local and Hong Kong branches in executing this digital transaction.

Based on the report, the branch previously executed the first cross-border digital RMB payment in the commodities field, purchasing imported iron ore for Baowu Group using digital currency. Additionally, the bank has been assisting in developing system support for foreign financial institutions, including the launch of a digital RMB project for BNP Paribas (China), and facilitating digital RMB business and payment systems.

CBDC advancement accelerates

In October, a Chinese foreign exchange regulator commented on the unique “programmable features” of CBDCs, suggesting that they could play a crucial role in amplifying the efficacy of monetary policy tools.

Moreover, state-owned Chinese banks have been actively participating in trials by the Bank of International Settlements. The country is focusing on cross-border transactions using digital currencies, positioning it at the forefront of digital currency implementation.

Based on data from the Atlantic Council, 130 countries that make up 98% of the world’s GDP are actively considering CBDC adoption. This marks a significant increase from May 2020, when only 35 countries were in that stage.

The advancement in the development of CBDCs is notable among the G20 nations, with 19 countries reaching the advanced pilot stage.

Recently, a Norges Bank working group launched the fourth phase of an in-depth study into CBDCs, indicating widespread international interest.

Meanwhile, stablecoins adoption has also caught the attention of the world’s central banks as per Bank of Korea Governor Rhee Chang-Yong. The official also highlighted the challenges stablecoins present to financial stability.

The governor pointed out the necessity for central banks to accelerate the deployment of their digital currencies to ensure stability and maintain control in the evolving monetary environment.

Also Read: Standard Chartered Entered China’s e-CNY Pilot Program