Digital Yuan: China Launches international operations centre to Boost Cross-Border Use
TL;DR Breakdown
- China inaugurates international operations centre for the digital yuan
- Central Bank unveils three platforms to facilitate cross-border trading of the Chinese yuan
- The plans for the center were announced in June by the PBOC governor
China has inaugurated an international operations centre for its digital yuan in Shanghai, marking yet another milestone in the development of the central bank digital currency (CBDC).
Digital Yuan and decoupling from the US dollar
China was the first major economy to announce and launch a CBDC (e-CNY/digital yuan), with pilot programs launched as early as 2019. Since then, the program has grown to accommodate a variety of transactions, including retail payments, public transport charges, and even the dispersal of government funds.
However, growing trade tensions with the United States and the unstable relations between the two countries have caused China to accelerate the growth of international adoption of the yuan, with the digital yuan being the key to developing a fast, efficient and secure method of cross-border payments.
The inauguration of the international operations centre marks another milestone in this journey. The centre highlights three platforms to encourage the use of e-CNY, including a cross-border digital payment platform, a blockchain network to enable on-chain payments and information transfers, and a digital asset platform that will enable the existing financial infrastructure to transition to the blockchain.
The cross-border payment platform will use the e-CNY as a mode of payment for high-efficiency, low-cost transactions. On the other hand, the two blockchain platforms aim to provide standardized services enabling easy adoption of blockchain technology to replace traditional and outdated financial operations.
According to a recent report by The Economist, over 30% of China’s foreign trade is settled through its own currency, including 50% of all cross-border transactions and almost 100% of its lending to foreign nations. The key to driving this adoption so high is the Cross-Border Interbank Payment System (CIPS), China’s alternative to SWIFT, which allows the circumvention of Western sanctions and the US dollar. With the growing adoption of its digital yuan, the financial independence of China is only bound to grow.
