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The test, which lasted six weeks and ended late last month, is part of m-Bridge, an initiative that pilots cross-border payments in digital currencies issued by the central banks of China, Hong Kong, Thailand, and the United Arab Emirates.
China’s digital yuan dominated the spotlight in the world’s largest cross-border central bank digital currency (CBDC) trial to date, according to a report.
According to a Bank of International Settlement (BIS) report, in the $22 million pilot that used CBDCs to settle international trades, China’s digital yuan, or e-CNY, was the most issued and actively traded token, a feat that shows Beijing is speeding up the globalization of the yuan amid rising geopolitical tensions.
The test, which lasted six weeks and ended late last month, is part of m-Bridge, an initiative that was launched to pilot cross-border payments in digital currencies, including digital yuan, issued by the central banks of China, Hong Kong, Thailand, and the United Arab Emirates.
In the testing period between August 15 and September 23, a total of 11.8 million yuan ($1.64 million) worth of e-CNY was issued, and the Chinese currency was used in a total of 72 payment and foreign exchange transactions, significantly more than each of the other three currencies.
The Bank of China and China Construction Bank were two of the top five state-owned banks in China that took part in the pilot and settled CBDCs on behalf of their corporate customers.
Given the nation’s significant regional trade contribution, the comparatively high number of e-CNY issuances “may represent increasing demand for yuan-denominated transactions,” the BIS Innovation Hub Hong Kong Center stated.
The latest data shows that a yuan internationalization tracker compiled by Standard Chartered rose to a new high in July, driven by the strong issuance of yuan-denominated bonds in Hong Kong.
The digital yuan, since last year has seen considerable growth after Beijing announced a crackdown on cryptocurrency activities. Mainland China saw a 31% decline in the number of digital asset transactions July 2021 and June 2022, led by Bitcoin which saw its value drop over 40% during that period.
In an effort to promote the global use of the digital yuan, the PBoC upgraded a currency swap facility with Hong Kong to a permanent agreement in July before agreeing to set up a yuan clearing hub in Kazakhstan in September.
Since the imposition of the western sanctions, the usage of the yuan in international transactions has also increased in Russia, and an increasing number of Russian businesses, including Rosneft, Rusal, and Polyus, have issued yuan bonds.
G. Bin Zhao, senior economist at PwC China, stated that many countries across the globe, including China, are wary of financial sanctions from the United States. “This provides a historic window for China to promote yuan internationalization as the US weaponizes the dollar,” he stated before adding that the e-CNY provides a shortcut.
The m-Bridge project, initiated jointly by the four participating central banks and the BIS innovation center, intends to eventually create a shared platform for effective, affordable digital payments to support international trade.