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According to the Hong Kong Monetary Authority, the first phase of checks for the use of digital yuan across borders was a positive.
The People’s Bank of China’s Digital Currency Institute and the Hong Kong Monetary Authority are rapidly pushing forwards with their collaborative testing of the use of the digital yuan for cross-border payments.
According to Bloomberg, the HKMA team announced this week that the first phase of research for the currency’s cross-border use was a positive. Several parties were interested in the initial experiments, including selected merchants and a bank designated by mainland Chinese authorities. According to the HKMA, preparations for the next step of pilots are now in the works:
“We have tested the use of the related app, system connectivity and certain use cases such as cross-boundary purchases. We are discussing and collaborating with the PBOC [People’s Bank of China] on the next phase of technical testing, including the feasibility of broadening and deepening the use of e-CNY for cross-boundary payments.”
China’s ongoing development of the digital yuan — a central bank digital currency that is also sometimes referred to by the names DC/EP or e-CNY — has set an ambitious pace for global research into and potential issuance of CBDCs worldwide.
The nation is the largest in the world in terms of CBDC growth and research, having completed several advanced pilots on the mainland and unveiling further plans to facilitate the currency’s adoption during the 2022 Winter Olympics in Beijing.
Since 2017, the HKMA has been involved in a number of joint ventures to investigate the viability of CBDC issuance, both for domestic inter-bank payments and for cross-border payments, with partners including the Bank of Thailand and the Central Bank of the United Arab Emirates, in addition to the PBoC.
Michael Ho, principal of financial services at Oliver Wyman and the co-author of a recently published report on the digital yuan, has argued that the significance of China’s new currency lies less in the mere fact of increased digitalization but rather in the prospective “introduction of a large-scale instant payment infrastructure, sponsored by the Chinese gov’t rather than private sector.”
With the potential for adoption by some of the world’s largest enterprises as well as an increasingly globally connected domestic population, Ho and his co-author, Jason Ekberg, predict that “if there is an extension of eCNY into cross-border transactions, supported by liberalisation policy, this will accelerate the RMB further as a true global trade current, bringing both savings and efficience.”