Chinese central bank is all keen on internationalizing the use of the national currency Renminbi (RMB) in the international market, and its central bank digital currency is a key step in this direction. The PBoC is confident that promoting the use of e-CNY will make RMB the world’s third-largest currency in terms of trade, settlements, and international reserves.
As per the RMB tracker of the Society for Worldwide Interbank Financial Telecommunication (SWIFT), RMB has a share of 2.46% in global payments and retains its position as the fifth-most active currency. The “RMB payments value in June surged 65.51 percent over the level in May,” reports state media China.org.
Tapping Into the Cross-Border E-commerce Market
China’s central bank digital currency Digital Renminbi (e-CNY) is currently undergoing multiple tests. Tu Yonghong, deputy director of the International Monetary Institute (IMI) believes that cross-border e-commerce could be game-changing for the use of e-CNY. This is because it is “natural and particularly easy to accept,” he added.
Other experts believe that the use of e-CNY will also help reform the international monetary system while simultaneously internationalizing the use of the Renminbi. The first such wide-scale practical use of e-CNY could be during the 2022 Winter Olympics in Beijing.
The Chinese central bank is working on this idea for a long. However, three U.S. senators have recently raised an objection to such a move saying that it can jeopardize the privacy and security of its athletes. It is clear that the international use of e-CNY will require consensus from the global community. Thus, the PBoC is actively engaging in communication.
The PBoC has also confirmed that it will actively explore cross-border pilot payment programs using e-CNY. Thus, it will work with other central banks and monetary authorities to set up exchange arrangements and regulatory cooperation.
China’s goal is clear as it looks to reduce the dependency on U.S. Dollar. Furthermore, it aims to take a lead when it comes to the use of digital money in global markets.