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Digital Yuan: Challenger to USD Dominance in $7T Global Finance

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In a rapidly changing financial landscape, the digital yuan is poised to challenge the long-standing dominance of the US dollar in global transactions, thanks to the innovative mBridge project. As the digital prototype gains momentum, experts are scrutinizing the implications of this new platform, which aims to expand the reach of China’s digital yuan and other central bank digital currencies (CBDCs).

The mBridge project, a collaborative effort involving China, Thailand, Hong Kong, and the United Arab Emirates, is on track to unveil a basic working product by the end of the year. Developed in partnership with the Bank for International Settlements (BIS) in Basel, Switzerland, this initiative is driving forward the integration of CBDCs into the global financial system.

The stakes are monumental. The US dollar currently features in a staggering $6.6 trillion of foreign exchange transactions daily, with half of the approximately $32 trillion in global trade invoiced in dollars. mBridge has the potential to facilitate the use of China’s yuan as an alternative to the dollar, particularly in settling large corporate transactions.

Although the mBridge project has been in development since 2017, its accelerating progress has prompted concerns among American and European officials. There are worries that it could grant China a head start in using the digital yuan to transform cross-border payments and potentially sidestep sanctions and regulations.

mBridge: Unveiling the Future of Digital Yuan

Josh Lipsky, director of the Atlantic Council’s GeoEconomics Center, acknowledges the eyebrow-raising developments around mBridge. He notes that while the project raises questions about China’s intentions to reduce reliance on dollar-based settlement systems, it is also a testament to the advanced research taking place at the BIS.

Ross Leckow, deputy head of the BIS Innovation Hub, emphasizes that the project’s current stage is developmental and there’s no set timeline for its operational implementation. However, the potential benefits are clear. The Hong Kong Monetary Authority and the Bank of Thailand share the goal of launching a minimum viable product to improve cross-border payments, aligning with G-20 priorities.

The mBridge project envisions a future where digital currencies powered by blockchain technology streamline international transactions. Its success would represent a notable advancement, potentially reducing cross-border transfer times from days to mere seconds. Despite the concerns raised by critics, the project aims to remove friction in the global financial system rather than fragment it.

As mBridge evolves, it’s becoming increasingly clear that the digital yuan’s emergence challenges the dollar’s status as the world’s primary transactional currency. While the full implications of this paradigm shift remain uncertain, the global financial landscape is undeniably evolving, with new digital currencies like China’s digital yuan at the forefront of this transformation.

Digital Yuan’s Cross-Border Soar: Hong Kong Trials Galore

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China’s central bank digital currency, known as the digital yuan, is witnessing a growing adoption and an increase in use cases. However, it is important to note that despite this expansion, the digital yuan only accounts for a mere 0.16% of China’s overall monetary supply.

The country’s central bank governor, Yi Gang, reported that the digital yuan has facilitated transactions worth nearly $250 billion during the one-and-a-half-year period since its pilot launch. As of the end of June, the total value of transactions reached an impressive 1.8 trillion yuan.

During this time, approximately 950 million transactions were conducted through around 120 million digital yuan wallets, resulting in an average transaction amount of roughly $260.

Despite the significant progress, it is evident that there is still considerable room for growth. By the end of June, only $2.3 billion, equivalent to 16.5 billion digital yuan, was in circulation, accounting for just 0.16% of China’s monetary supply. This data was sourced from a July 19 report by Reuters.

The digital yuan’s adoption is particularly modest when compared to China’s vast population of 1.4 billion. While there have been a few trials in Hong Kong, the primary usage of the digital yuan remains within the domestic retail payments landscape.

In an effort to further enhance cross-border applications, the Bank of China Hong Kong initiated a trial of a cross-border payment scheme for its customers at select retail stores in Hong Kong. This move marks the third cross-border trial of the central bank digital currency in Hong Kong, as reported by the South China Morning Post on July 18.

Lagging Behind: Digital Yuan vs. Public Blockchains

Last year, the BOCHK ran a program encouraging customers to set up BOC e-CNY wallets, rewarding them with $14 (100 yuan) for use at the Hong Kong supermarket chain U Select.

To expand the potential use cases of the digital yuan, the central bank integrated smart contract functionality in January. However, despite these developments, the digital yuan’s value processed in transactions, amounting to $250 billion, represents an impressive 70% increase from the figure cited in August 2022.

Nonetheless, it is essential to recognize that the asset’s transaction value still lags significantly behind that of major public blockchains. For instance, in 2022, Bitcoin alone facilitated transactions worth $8.2 trillion, as reported by various sources.

In conclusion, while the asset’s adoption and use cases continue to grow, there is still a long way to go before it becomes a substantial part of China’s monetary landscape, especially when compared to other cryptocurrencies and traditional payment methods.

China starts digital yuan pilot trial on app stores

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China has released pilot versions of its digital yuan wallet application on both iOS and Android app stores. Meanwhile, the central bank takes it a notch higher by developing its digital currency. The local media, BlockBeats China took to Twitter to announce the launch.

The ‘e-CYN” app (pilot version), which was developed by the People’s Bank of China’s (PBOC) digital currency research institute, was available to download on the Chinese Android and iOS app stores, on Tuesday in Shanghai.

PBOC governor, Yi Gang had said in November 2021, that, the country opts to continue to advance the development of its Central Bank Digital Currency (CBDC) and enhance its design, usage, and interoperability with existing payment tools.

However, to download the trial app and activate the wallet, it is a requisite for users to reside in one of these 11 places in China: Shenzhen, Suzhou, Xiong’an, Chengdu, Shanghai, Hainan, Changsha, Xi’an, Qingdao, Dalian, and the Winter Olympics area.

An early start for yuan wallet’s CBDC in China

While countries all over the world are still at the stage of investigation of Digital currency technology, The Chinese have embraced an ahead of time pilot through CBDC for public use.

The PBOC had been at it, racing ahead with its own CBDC project, rolling out a virtual version of the yuan in trials across many provinces, for a while now. Many experts have said that the PBOC is likely to be the first to fully launch a CBDC.

What China’s CBDC could mean for the world

China is one of the very few countries that favor technology becoming far more important than money. By issuing a digital yuan, the country isn’t looking to dismount the U.S. dollars as the reserve currency, according to experts. In addition to rolling out the digital yuan in domestic pilots, the Chinese have made use of the digital yuan as a condition in the Regional Comprehensive Economic Partnership, as a successor to the Trans-Pacific Partnership that includes China and not the U.S. More importantly, it is accelerating a reality first broached by cryptocurrency that with the right technology, own money can be created and the rails to move it.

China urges McDonald’s to embrace digital yuan before the Winter Olympics

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China has been at the forefront of the central bank digital currency aka the CBDC game. While the world traverses into the digital world, governments from all across the globe were seen expressing immense interest in CBDCs. However, China stayed ahead of everyone through fast-paced developments. Now, with just months left for the Winter Olympics which is scheduled to take place in Beijing, the Chinese government was seen urging prominent fast-food chain, McDonald’s to accept the digital yuan.

The world seemingly liked the idea of cryptocurrencies. However, the industry’s decentralized nature and volatility appalled many. While taking out leaves from the crypto book, governments wanted to uphold supervision. Therefore, they decided to roll out CBDCs.

As several have just started to get on to the CBDC bandwagon, China was well ahead in the game. The country was rather quick to wrap up its testing phase and had already made the digital yuan available to the public. While prominent firms across the country were planning on incorporating the digital yuan into their system at their own pace, the Chinese government was reportedly coercing them to accept the CBDC.

China trying too hard to embrace its CBDC?

As per a recent report by the Financial Times, the Chinese government wanted McDonald’s to include the digital yuan into its payment system. The government required the fast-food giant to allow citizens to pay with the CBDC across all the outlets in the country.

Apart from McDonald’s, popular firms like Nike as well as Visa were pressured into accepting the digital yuan, the report suggested. Furthermore, this pressure was derived from the upcoming Winter Olympics, which is slated to take place in February.

The fervor around this currency was relatively high. However, the backlash it amassed overpowered everything. Several even suggested that the Chinese CBDC could rob the citizens of financial freedom as the digital yuan was mostly a tool of surveillance.

Alex Gladstein, chief strategy officer at the Human Rights Foundation commented about the same and said,

“The end of cash and the insta-analysis of financial transactions enable surveillance, state control, and, eventually, social engineering on a scale never thought possible.”

USA Senators urge Olympic committee to leave out American athletes from employing digital yuan

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With China hosting the 2022 Olympics, certain officials from the USA seemed concerned about American athletes using the Chinese central bank digital currencies [CBDC], the digital yuan during their time in the Asian country.

China took a massive plunge into the development of a national digital currency. China went on to become one of the first countries to develop and issue its very own CBDC. China’s fast-paced development of the digital yuan certainly caught the eyes of the world. Several countries did not want China to garner an upper hand in the financial sphere, which led them to instigate their very own research and development in the field.

With the digital yuan came an array of rumours surrounding the asset. Numerous officials noted that the Chinese government would be able to track and trace the finances of those using the asset. Keeping this in mind, three senators of the USA went on to write a letter to the Olympic officials urging them to keep the athletes representing the country from using the digital yuan.

USA athletes won’t be using the digital yuan?

The letter signed by Republican senators Marsha Blackburn, Roger Wicker and Cynthia Lummis noted that American athletes should be refrained from accepting or even using the Chinese CBDC.

The senators went on to express fear over how the Chinese Communist Party, along with the country’s central bank, the People’s Bank of China [PBoC], could use the digital yuan to keep an eye on athletes during their stay in the country and even after they revert to the USA.

Elaborating on the same, the senators wrote,

“The integration of China’s digital currency into global commerce has many problematic privacy implications. These concerns are especially pronounced given the Chinese Communist Party’s use of new and emerging technologies to suppress the Uyghur minority, the people of Hong Kong, and those across China who strive for freedom of expression. These concerns are not hypothetical. Rather, digital payment platforms such as WeChat, are already being used to surveil, threaten, and arrest Chinese citizens.”

Digital yuan adoption soars as Beijing subway announces support

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China’s central bank digital currency [CBDC], the digital yuan, has been under the spotlight for quite a while. The Chinese government’s fast-paced development put the asset on a pedestal. The latest news from the country affirmed that the government has been sprucing up the adoption of the digital yuan.

While several governments speculated that China hastened the development of its CBDC to garner financial dominance, a few others believed that the country was going on a digitalization spree. Nevertheless, cautioned by China’s plunge into CBDCs, an array of governments followed suit as they focused on developing their very own CBDC.

China, however, proved that it was way ahead in the game as it elevated the presence of CBDCs by inducing them into its transport system.

Digital yuan takes the Beijing subway

A recent report revealed that users of the Beijing subway would use their digital yuan to get around. This would mean that the program would allow access to customers through 24 subway lines and four railway stations. While this initiative has already made its debut, it is reportedly limited to those with an Industrial and commercial bank of China bank accounts.

Elaborating on the functions of this program, a customer service representative of the Beijing rail transit network stated,

“You need to download a mobile APP that is linked with your bank account to access to the service.”

Furthermore, Beijing’s digital travel experience isn’t limited to this as the region hopes to induce digital yuan across various sectors.

Once home to the most prominent Bitcoin mining farms in the country, China has given up this title to Kazakhstan. With China taking down several crypto platforms across the country, it seems to be focusing on the advancement of the digital yuan. Earlier in June, about 3,000 ATMs in Beijing were made available for the withdrawal as well as the deposit of the Chinese CBDC.

China’s Digital Yuan Ranks Third in World; Second In Asia In CBDC Race: Report

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China has made significant progress in the development of central bank digital currency [CBDC], becoming the world’s first major economy to pilot a digital currency. Even so, as per a new report, the digital yuan is not the topmost CBDC in the world or in Asia.

According to the latest report by PricewaterhouseCoopers [PwC], China is third when it comes to project maturity, behind the Bahamas with the Sand Dollar and Cambodia, with project Bakong.

The report also mentioned that the digital version of the Bahamian Dollar as well as Cambodia’s DLT-based interbank payment system is either accessible to all the residents via the mobile application, physical payment card, or already is tied up with domestic commercial banks and payment processors. But China is still at the advanced level of trial.

China’s Digital Yuan Might Not Be Able to Tip Dollar’s Supremacy Just Yet

Despite popular notions about Digital Yuan, there are other CBDCs at the global level that require attention. Many market commentators have previously speculated China’s digital yuan to be a huge threat to the dollar. The digitization of China’s yuan has been a thing of global fascination especially in the backdrop of a flourishing cryptocurrency market. With regards to political implications and as well as the new economic levers that digital yuan might generate for the government domestically as well internationally, were also given adequate food for thought.

However, a senior Bank of Japan official recently downplayed the potential for China’s digital yuan to threaten the dollar’s position as the world’s main reserve currency. Kazushige Kamiyama, who happens to be head of the BOJ’s payment systems department and the individual who is tasked with looking into a virtual Japanese currency stated,

“The dollar’s status as the key global currency won’t change so easily. In fact, the dollar’s advantage may strengthen further if the U.S. goes with digitalization.”

Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, also noted that despite China’s massively-hyped digital currency advances, the digitized yuan is yet to prove to be cheaper, more efficient, more private, or more convenient than the existing domestic and international payment systems. While addressing the “threat” to the USD, Chorzempa added,

“[It is] unlikely to represent any more a threat to the dollar’s international dominance than the current forms of RMB, at least over the short and medium-term”

China Takes Digital Yuan To Hong Kong For A Cross-Border Pilot

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China has been spearheading the entire central bank digital currency [CBDC] game. The Covid-19 pandemic enhanced the importance of digitalization as a mere human touch had the ability to cause death. While several countries despise cryptocurrencies they still decided to go ahead with a central bank digital currency.

While the world fears that China could garner financial and technological dominance over the globe, several countries have been forced to fasten the pace in the development of their respective CBDC. Japan recently revealed that it would soon roll out Phase 1 of its CBDC pilot. Just when all the regions are prepping for the launch of this digital asset, China revealed that it had conducted its first cross-border pilot of its CBDC.

China’s Digital Yuan Moves Ahead With Full Force

As per a recent report from a local news platform, Sina Finance China has taken the digital yuan to Hong Kong to explore the cross-border aspect. The Chinese central bank, People’s Bank of China’s [PBoC] digital currency research bureau’s director, Wang Xin revealed that a couple of technical tests were done to review the cross-border phase of the Chinese digital currency.

Wang Xin reportedly made this announcement at the State Council Information Office of China hosted a press conference earlier this week. During this event, the official pointed out that the PBoC had joined hands with the Hong Kong Monetary Authority for this pilot.

Additionally, several platforms across the country have been testing the digital yuan. Recently, the country had given the public a chance to test the digital yuan. Several shoppers reportedly carried out over a thousand transactions during the Women’s day weekend.

Speaking about the emergence of CBDCs, Wang Xin told CNBC,

“On one hand, this is related to more and more central banks in the world participating in the development of domestic digital currencies. On the other hand, this (interest) may also be related to the large increase in the price of bitcoin.”

Digital Yuan To Uphold Privacy By Supporting Anonymous Transactions

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China’s central bank digital currency [CBDC], the digital yuan has been making headlines for quite a while now. The country’s plunge towards digitalization inspired an array of other countries to start developing their own digital asset. While China is well ahead in the game, all the other countries were trying to catch up.

Despite, the emergence of the digital yuan, rumors pertaining to the Chinese government controlling their citizens finances began surfacing. While privacy was a great concern of many citizens, with regard to the digital yuan, an official of the Chinese central bank affirmed that a certain magnitude of privacy would be given to those using the country’s CBDC.

Digital Yuan To Entail “Controllable Anonymity”

In a recent report by a local Chinese news portal, it was revealed that the People’s Bank of China [PBoC] intended to uphold privacy with the launch of the digital yuan. Speaking about the same at the 2021 China Development Forum, the head of the digital currency research institute of the People’s Bank of China, Mu Changchun, addressed the potentials of the country’s CBDC.

While suggesting that a entirely anonymous CBDC was out of the picture, Mu pointed out that it wouldn’t be very feasible. Since the Chinese currency would soon be used throughout the country as a national currency,it needs to come under certain anti-money laundering, anti-tax evasion as well as counter-terrorist financing procedures. However, privacy would still find its place, Mu announced.

Limited anonymity would be available, revealed the official. The PBoC will reportedly permit anonymous digital yuan transactions, however, in dainty amounts. He added,

“The digital renminbi adopts a design of small amounts anonymous, keeping large amounts traceable. In short, the protection of user privacy by digital renminbi is the highest among the current payment tools.”

Additionally, the digital yuan is already out and about for testing. The PBoC has been testing the Chinese CBDC on various platforms across the globe.

China Stays Ahead In The CBDC Game As Digital Yuan Does In For Testing

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China’s keenness towards digitalization, particularly in the development of Central Bank Digital Currencies [CBDC] has forced all the other countries across the globe to start exploring the same. China undoubtedly has an upper hand in this considering the country’s ever-growing interest and fast-paced development in the same.

While news pertaining to the country releasing the digital yuan for testing had taken over the headlines, all the other countries began speeding up the process. Now, two prominent stores in Shanghai have decided to test the Chinese CBDC.

China Still Ahead In The CBDC Game

Recently, a news portal reported that the New World City and New World Daimaru Department Store in Shanghai along with Taikang Food Store, a food caterer had carried out more than a thousand transactions with regard to the digital yuan, just during the last weekend.

Li Wei, the brand director of Shanghai New World spoke about the same and said,

“We have worked to upgrade the digital payment module ahead of the trial program, and we believe it offered extra stimulus for shoppers on top of the existing sales campaign.”

The latest trial coincided with International Women’s Day which further spruced up the sales. Banks like China Construction Bank and the Bank of Communications joined in to facilitate the latest trial. Users were reportedly provided with virtual coupons for using the digital yuan.

Rewards worth 150 yuan were given to over 2,000 participants by the China Construction Bank and 100 yuan for about 6,500 shoppers by the Bank of Communications.

A shopper surnamed Xu spoke about the latest trial and said,

“The payment procedure takes no more effort than other existing third-party services, and it wouldn’t hurt to try to use the payment method at other places.”

This undoubtedly puts China on a pedestal as all the other countries are still exploring the prospects of rolling out a CBDC.