China is stepping up efforts to encourage the use of its digital yuan in cross-border payments and overseas markets, offering an alternative amid an international frenzy over stablecoins, as it aims to reshape the global financial architecture now dominated by the US dollar.
China’s international operations centre for the digital yuan opened in Shanghai on Thursday, with the People’s Bank of China highlighting three platforms designed to accelerate the internationalisation of the digital Chinese currency.
“The evolution of monetary and payment systems in the digital era is a historical inevitability,” central bank deputy governor Lu Lei told a news conference on Wednesday.
“The PBOC is committed to providing open, inclusive and innovative solutions to improve the global cross-border payment system.”
One of the three platforms is a cross-border digital payment platform that will explore the use of the central bank-backed digital currency – also known as e-CNY – to improve the efficiency of international transactions.
Another is a blockchain service platform that will enable on-chain payments and provide standardised cross-chain transaction information transfers, and the third is a digital asset platform that will help existing financial infrastructure expand onto the blockchain by providing standardised, ready-to-use digital asset services.
Thursday’s opening came three months after PBOC governor Pan Gongsheng first announced plans for the centre at the Lujiazui Forum in Shanghai in June.
China was the first major economy to introduce a central bank digital currency. Piloted in selected population centres in 2019, the digital yuan is typically used for small everyday transactions such as retail payments, government disbursements, salary transfers and public transport fares.
But amid growing tensions with the United States over trade and technology issues, China has stepped up its push to expand overseas adoption of the yuan and e-CNY and accelerate the rise of Shanghai as a global financial hub to reduce its reliance on a US dollar-dominated financial system.
In July, US President Donald Trump signed a law that would allow regulated US banks to issue stablecoins – cryptocurrencies pegged to another asset – backed by the US dollar, a move that many observers say could pave the way for mass-market adoption and extend the currency’s dominance into the digital realm.
While Beijing is wary of cryptocurrencies and their related risks, it has embraced the use of blockchain technology for its traceability and transparency, and applied it in the adoption of e-CNY.
The PBOC has begun to collaborate with central banks in Hong Kong, Thailand, the United Arab Emirates and Saudi Arabia on a cross-border platform for digital currency payments.
In a notice issued by the Cyberspace Administration of China on September 13, Beijing encouraged more financial institutions to explore the use of the digital yuan for cross-border payments.
“The launch of the centre in Shanghai not only facilitates cross-border payments but also aligns closely with the core functions of Shanghai as an international financial centre,” Lu said on Wednesday.
“Looking ahead, the PBOC will continue to support the steady and sustained development of the digital yuan international operations centre, providing robust support for the facilitation of cross-border trade, investment and financing.” — SOUTH CHINA MORNING POST