July 28, 2023
By Anjali Kochhar
Chinese banks are rapidly embracing the digital yuan, China’s central bank digital currency (CBDC), in various aspects of their operations. Industrial Bank, a joint-stock commercial bank based in Fuzhou, has made a significant move by launching the nation’s first CBDC-powered settlement service for bulk commodity spot clearing. The service was introduced in collaboration with the Shanghai Clearing House.
This development comes just a month after the Shanghai Clearing House’s announcement of its intention to adopt the digital yuan in its operations. Chinese firms are known for being major buyers of commodities on the global stage. By using the digital yuan in clearing houses, officials believe that cross-border settlement of bulk commodities will become more secure. Additionally, they anticipate that the digital yuan will streamline the process, making it faster, more efficient, and cost-effective for financial institutions and service providers.
Industrial Bank’s pioneering move has already inspired seven other banks to plan similar offerings. The bank integrated digital yuan payment methods into the clearing and settlement process for commodity spot transactions, providing customers with more convenient and improved settlement options. The bank has been working with the Shanghai Clearing House on bulk commodity spot clearing since 2022 and has already processed a substantial $3.6 billion worth of transactions in this sector.
The adoption of the digital yuan is not limited to Industrial Bank. The People’s Bank of China (PBoC) is actively involving more regional banks in its pilot program. Recently, the Tianjin Binhai Rural Commercial Bank’s Chengxi branch issued its first-ever personal digital yuan loan to a customer in Qinghai Province. The loan amounted to around $14,000 worth of e-CNY.
Moreover, Chinese banks are exploring the use of the digital yuan in wealth management products, potentially allowing traders in China to purchase securities using the digital currency. The Bank of China, a state-owned commercial banking firm, has already joined the PBoC’s Hong Kong cross-border payments pilot.
Furthermore, government-owned telecoms companies have joined the CBDC project by launching SIM card-based offline wallets. This signifies a broader effort by various sectors to embrace the digital yuan and integrate it into different aspects of financial services and transactions.
Overall, the rapid adoption of the digital yuan by Chinese banks and financial institutions is paving the way for a more digitised and efficient financial ecosystem in the country. As more use cases emerge and different players join the initiative, the digital yuan’s influence is expected to grow further in China’s financial landscape.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
