Speaking at the Monetary Authority of Singapore (MAS) conference on July 19, the governor of China's central bank, Yi Gang, reflected on the journey of China's central bank digital currency (CBDC) since the start of its pilot phase in January 2022, and looked forward to the next stage - improving cross-border payments.
In the 18 months since the Digital Yuan pilot phase started, 950 million transactions have been made using the e-CNY, between 120 million wallets, and totaling 1.8 trillion yuan ($250 billion) in value.
However, there’s still a long way to go until all of the country’s 1.4 billion population adopts the e-CNY as their day-to-day payment method. According to Yi, the authorities are taking their time before officially releasing the digital yuan so that they can offer a flawless digital currency to the country’s population.
"And you can see that right now the balance of e-CNY is only counting two-tenths of 1% of M0, so that the balance is very small, but with this kind of balance (we) support a big number of transactions, which means that the velocity is high and more efficient," Yi said.
To improve the Digital Yuan, the country’s institutions have been gradually implementing it in different markets, provinces, and scenarios.
Last week, The Bank of China announced it was beginning trials of a new payment method that combines Super-SIM cards with Near Field Communication Technology (NFC) to offer customers an offline and zero-battery form of payment.
In April, several Chinese provinces announced that public servants in the region would be paid through the e-CNY app. During the New Lunar Period, the government released the first consumer stimulus since the start of the pandemic in digital yuan.
Cross-border payments with e-CNY
Perhaps two of the most significant trials so far have been those conducted in Hong Kong and at the border province Xuzhou, as they allowed e-CNY to be tested as a currency for cross-border payments.
Remittances and international payments have , since the dawn of the international financial system, been costly and tardy to perform. The age of the internet and the new novel payment methods that came with it helped to significantly reduce these costs. However, CBDCs' value proposition is bolder still as they promise to completely eliminate bank fees and transfer processing time.
But for China, a cheap, immediate, universal, and secure digital renminbi is more than just a cost-effective or convenient solution - it’s a matter of geopolitical power.
The digital yuan can ease the payment process between the regions and projects of the Belt and Road Initiative - an infrastructure development strategy that connects Europe to Africa and Asia to boost trade and economic growth while increasing China’s power.
At the MAS conference held in Singapore, Yi Gang revealed that China’s Central Bank was open to working with its regional partners to implement real-time digital settlements between China's CBDC and the Singapore dollar, hence moving to the next, and perhaps most important stage of the country’s digital currency journey.
