China’s digital yuan, officially known as the e-CNY, is one of the main central bank digital currencies ( CBDCs ) currently being developed. Introduced by the People’s Bank of China ( PBoC ) in 2014, the e-CNY aims to modernize payments, enhance financial inclusion, and significantly elevate the renminbi’s ( RMB ) international standing.
These efforts are now taking a pivotal step forward. Speaking at the Lujiazui Forum on June 18, PBoC governor Pan Gongsheng announced plans to establish an international operation centre for the e-CNY in Shanghai, a strategic move that is poised to amplify the digital yuan’s global ambitions.
The centre’s primary objectives are to promote the internationalization of the e-CNY, facilitate cross-border transactions via China’s Cross-Border Interbank Payment System ( CIPS ), and support a multi-polar currency system, ultimately aiming to reduce global reliance on the US dollar.
The e-CNY’s underlying blockchain technology is expected to offer efficient and traceable transactions, appealing to international partners seeking alternatives to traditional systems. Early international support for CIPS is already evident, with several foreign banks, including Standard Bank and First Abu Dhabi Bank, committing to its use.
The new centre will also foster innovations in offshore trade finance, with a pilot programme slated for Shanghai’s Lingang area. This strategic pivot resonates with the broader discussions on global financial governance, particularly the mounting calls to reduce over-reliance on a single sovereign currency and foster benign competition among major currencies, a sentiment driven by both economic factors and growing geopolitical considerations.
Track record of achievements
The e-CNY has already achieved significant milestones in its domestic adoption and international trials. From 2019, pilot programmes began in Chinese cities like Shenzhen, Chengdu, and Suzhou, initially testing its viability as a retail CBDC. By 2022, trials had expanded to 26 cities, with 5.6 million merchants accepting the digital yuan, and plans were announced to extend trials to entire provinces. High-profile events like the 2022 Beijing Winter Olympics further demonstrated the e-CNY’s scalability in 10 regions.
Transaction volumes have significantly increased, according to data from the Atlantic Council, reaching 7 trillion yuan ( US$986 billion ) as of June 2024 across multiple sectors spanning education and tourism. This is nearly four times the 1.8 trillion yuan recorded by the PBoC a year earlier.
Pan’s speech highlights how emerging technologies like blockchain and distributed ledger technology are driving the vigorous development of CBDCs, enabling payment-as-settlement and fundamentally reshaping traditional payment systems by significantly shortening cross-border payment chains.
However, these advancements also pose significant challenges for financial supervision, indicating a need for careful regulatory consideration. Despite its progress, the e-CNY is facing hurdles such as domestic preference for private payment systems, geopolitical tensions and regulatory differences that are slowing global adoption, and privacy concerns related to enhanced transaction monitoring.