China Evaluating Use Of Digital Yuan For International Payments

The People’s Bank of China (PBOC) is evaluating use of the digital yuan for cross-border payments and is open to discussions about developing worldwide principles with the international monetary system, Reuters reported on Friday (July 16), citing a white paper.

China’s central bank indicated that it would enhance security and privacy measures as it continues to move forward with testing of the digital yuan. The white paper is the first broad scope of China’s plans for a central bank digital currency (CBDC) but doesn’t include a timetable for the official launch.

“The internationalization of a currency is a natural result of market selection,” according to the white paper, per Reuters. China’s international goals were minimized in the paper.

The digital yuan, also known as e-CNY or renminbi, is being trialed in Shenzhen, Beijing, Shanghai and other big cities. Numerous countries are working on developing their own CBDC but China is so far the pioneer.

“Though technically ready for cross-border use, e-CNY is still designed mainly for domestic retail payments at present,” per the white paper.

The PBOC indicated that it was planning to evaluate an international program with other central banks, “preconditioned on mutual respect to monetary sovereignty and compliance,” Reuters reported.

Further, China’s central bank said it was “willing to participate actively in international exchanges of views on digital fiat currency and discuss standards setting … in order to jointly advance the development of the international monetary system,” according to the Reuters report.

China’s lottery for piloting the digital yuan was expanded to 10 million people earlier this month. The e-CNY is also planned for a wider pilot launch at the 2022 Beijing Winter Olympics. So far, the country has issued $4.5 million of the digital yuan for its trial.

The central bank said in March that the digital yuan wouldn’t replace payment platforms like AliPay and WeChat Pay. The digital yuan could be used as a backup to app payments in the event of technical issues.