…Researched and contributed by Henry George for TDPel Media.
China is looking to expand the use of its central bank digital currency (CBDC), the digital yuan or e-CNY, in its Belt and Road initiative and cross-border trades.
The digital yuan is one of the first CBDCs to be developed and widely tested.
Although there has not been an official launch, the government has expanded testing to include multiple cities and millions of people.
Xuzhou city, which serves as a departure point for numerous goods trains from China headed for Europe, issued a plan promoting the use of the digital currency in cross-border trade.
The city is a trade hub and plans to promote e-CNY use to pay for services and storage charges for goods carried by cross-border trains.
The plan also aims to extend the use of the digital currency to pay taxes and utility services in the city in the future.
Jiangsu province has been particularly proactive in promoting digital yuan use cases.
Changshu, another city in the province, announced that it will pay civil servants and people who work for public institutions using digital yuan.
The Hong Kong Monetary Authority also announced that the Guangdong-Hong Kong-Macau Greater Bay Area will be a testing ground for making cross-border payments using digital yuan.
The HKMA is working with the mainland’s central bank, the People’s Bank of China, to test the digital yuan as a cross-border payment tool in Hong Kong.
Another cross-border project involving Thailand and the United Arab Emirates is also being looked into by the HKMA, China, and two other nations to improve the efficiency and reduce the cost of cross-border transactions.
The Chinese government has ramped up its CBDC efforts as international trade markets are moving away from the standard U.S. dollar.
China has recently completed multiple trade treaties with Russia and India based on their national currency instead of the U.S. dollar.
The use of digital currencies can bring multiple benefits in cross-border transactions, such as faster settlement times and reduced costs.
However, there are also concerns around the potential impact on traditional banking systems and financial stability.