With its accelerated development on CBDC, China’s Central Bank PBOC is now exploring a digital currency cross-border project in collaboration with central banks of Thailand, Hong Kong, and the United Arab Emirates. PBoC is looking to tap into the current zeal with CBDCs in the Asian markets.
Also, FinTech developments in the Arab market are also catching up pace slowly. Over the last year, the Bank of Thailand (BOT) and the Hong Kong Monetary Authority (HKMA) have been working together to explore CBDC applications.
These two banks have been exploring the use of distributed ledger technology (DLT) that is at the core of decentralizing operations with no single players having the final say or the monopoly.
Joining them ahead in this project is the digital currency research institute of the People’s Bank of China (PBoC) and the Central Bank of United Arab Emirates. Hong Kong’s central bank said that this new project will explore ways of using DLTs to “facilitate real-time cross-border foreign exchange payment-versus-payment transactions”.
Traditional financial institutions have failed to improvise Cross-border payments technology over the last two decades. They have been relatively slow and take around two days for settlements as of date. Blockchain-based digital currencies are now completely changing the market hinting at a major financial technology (FinTech) revolution ahead.
Well, it has even got the central banks interested to transition their systems towards DLT and blockchain.
China’s Growing Focus on Digital Currencies
While China banned public cryptocurrencies 3.5 years back in 2017, it has been increasingly focused on having its own central bank digital currency aka the Digital Yuan. Over the last two years, China has accelerated its work on CBDC. The People’s Bank of China (PBoC) has been conducting pilot tests in some of its cities like Chengdu and Shenzhen.
With the CBDC race, China is planning to push the use of its Yaun in the global market while reducing its dependency on the U.S. dollar. Linghao Bao, an analyst at Trivium China, told CNBC:
“The evidence is the PBOC is still focused on domestic payments. But this sort of internationalization of the renminbi is the long-term strategic goal”.