By Michael Scott
China affirms its pole position in integrating central bank digital currency (CBDCs) utilization to facilitate transactions by expanding the Belt and Road project scope. The move cements China’s commitment since joining the list of a few nations to initiate the CBDCs project.
Nonetheless, the China government is yet to officially unveil the CBDC despite the timely completion of the development phase.
Digital Yuan Set for Expanded Scope in Facilitating Cross-Border Trade
The recent update by China reveals advanced plans to expand the utilization of CBDCs identified as digital Yuan (e-CNY) to facilitate cross-border trade and the Belt and Road program. The country’s digital Yuan, also identified as digital RMB, is among the pioneer CBDCs initiated and widely tested.
While China has yet to launch the CBDC officially, the government is expanding the testing to several cities involving millions of individuals. In particular, it unveiled advanced plans in Xuzhou City to promote the utilization of Chinese digital currency for cross-border trading.
The choice of Xuzhou City is critical for the digital Yuan since it is the country’s departure center for multiple goods trains destined for Europe. South China Morning Post revealed that it harbors approximately 18 cross-border rail connections destined for 21 Asian and European countries.
Being a global trade hub, Xuzhou City is set to offer an e-CNY fundamental assessment of its viability in settling services payments and storage charges for products ferried by the cross-border trains. The government intends to extend the experiment in taxes and utility services settlement within the city.
China has in the past indicated that Jiangsu province emerged as the leading jurisdiction that proactively promotes digital yuan use cases. Its prominent role is exhibited by Changshu City, which recently declared to utilize the digital Yuan when paying civil servants in public institutions.
Assessment of e-CNY Viability Expanded into Hong Kong
Besides Xuzhou and Changshu cities, the Hong Kong Monetary Authority (HKMA) unveiled plans for the Guangdong Macau Greater Bay region, becoming the testing ground to use e-CNY for cross-border payments.
The announcement revealed that HKMA is partnering with the People’s Bank of China from the mainland to assess the viability of digital Yuan in settling cross-border payments. In his address, HKMA deputy executive Darryl Chan expressed confidence that the digital Yuan would facilitate cross-border payments.
China Tests Ground for Cross-Border Project
Chan revealed that HKMA was conducting a feasibility study on launching a cross-border project featuring the United Arab Emirates (UAE) and Thailand alongside other undisclosed nations. The project aims to improve efficiency and lower the cost of cross-border transactions.
The advanced plans undertaken by China to expand CBDC use cases and leverage it within the Belt and Road project coincide with a period that international trade partners are mulling ditching the US dollar.
Ramping up the CBDC efforts portrays the commitment by China to lead the international trade market into ushering in alternative transaction standards. Beyond its introduction in the Belt and Road project, the digital Yuan is set to have critical input in the Asian region.
It is unsurprising if China proposes the digital Yuan to replace the standard US dollar. Specifically, China recently entered multiple trade treaties involving Russia and India utilizing the use of respective national currencies in the trade settlement.
China’s Commitment to Onboard Compliant Crypto Companies in Hong Kong
China’s interest in the crypto ecosystem is evident, with the state-affiliated banks facilitating the onboarding of regulated operators to establish in Hong Kong. Mainly, Chinese banks are prioritizing partnerships to reduce collaborative projects.
China’s increased interest in Hong Kong’s crypto ecosystem is surprising, considering the blanket ban imposed on all crypto-related activities within mainland territory.
Bank of Communications is leading the Chinese financial institutions by establishing collaborations to open accounts for multiple regulated crypto enterprises. ZA Bank is set to utilize its virtual banking ecosystem as the settlement medium for crypto firms, particularly for fiat-based transactions, including the Chinese Yuan, Hong Kong, and US dollar.