Digital Renminbi Making Headway
(15 September 2020 – Beijing) The People's Bank of China (PBOC) is making headway in pioneering domestic use of its digital currency with pilot trials conducted in several economically significant cities.
Digital Currency Electronic Payment (DCEP), the digital version of the renminbi, will be tested in Shenzhen, Suzhou, Xiongan and Chengdu and at venues of the 2022 Winter Olympics scheduled for Beijing and vicinity.
DCEP has a two-tier structure – the PBOC would issue the money to commercial banks, which would then provide it to individuals through their e-wallet accounts – while the exact technical approach and privacy settings remain unclear. PBOC governor Yi Gang has so far declined to disclose any timetable for a full roll-out of the DCEP.
DCEP could potentially present an attractive alternative to the established international funds-transfer system known as SWIFT, with lower transaction fees. The Switzerland-based Bank for International Settlements suggested in a recent report that the DCEP could be used for trade invoicing with foreign parties in yuan. “But this is still subject to consultation with other central banks and entities. The exact launch date remains unclear,” it added.
East and Partners latest research reveals that renminbi is becoming more widely used in the Asia Pacific region. It accounts for nearly 20 percent of the business volume for a typical small-to-medium-sized trading business in Singapore, and the figure is even higher in Hong Kong at close to one-third. This highlights the potential of further digitising international payments should the DCEP eventually be linked up to the cross-border payments system.