China’s digital yuan pilot gathers steam

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More foreign banks have voiced their participation in China’s central bank digital currency (CBDC) pilot, allowing more users to transact using the digital yuan.

Four foreign-funded banks recently joined the CBDC wagon after obtaining clearance from the People’s Bank of China (PBoC). The financial institutions include the Chinese arms of Standard Chartered (NASDAQ: SCBFF), HSBC (NASDAQ: HSBC), Fubon, and Hang Seng Bank (NASDAQ: HSNGF), joining the ranks of over 40 commercial banks.

Despite their late entry, the participating foreign banks have hinted toward several use cases for the digital yuan for their customers, including the functionalities of sending, receiving, and holding CBDCs within their respective banking mobile applications.

HSBC China disclosed that customers can bind bank cards with the digital yuan app for top-ups with redeemable features. The banks say integrating with the digital yuan will support offline and online payments, strengthen the local payments ecosystem, and introduce the digital yuan to foreign markets.

“As an important infrastructure for the digital economy, the e-CNY will enhance the payment and consumption experience and strengthen the connection between China and the international financial market,” said Standard Chartered China CEO Jerry Zhang.

Standard Chartered said joining the CBDC pilots will allow it to explore novel use cases in cross-border trade, supply chain financing, and trade financing. The institution noted that its services will be tailored to individual and corporate clients in line with the guidelines laid out by the PBoC.

“We are very pleased to participate in the pilot of digital RMB business as one of the first foreign banks,” said Standard Chartered China President Zhang Xiaolei. “As an important infrastructure for the digital economy, the e-CNY will enhance the payment and consumption experience and strengthen the connection between China and the international financial market.”

Participating foreign banks have garnered considerable CBDC experience in other jurisdictions, with HSBC and Standard Chartered cutting their teeth with the Hong Kong Monetary Authority (HKMA) CBDC experiments, netting impressive results along the way.

Meanwhile, seeing the digital yuan as a major tool that would drive and revitalize cross-border payments, Singaporean financial institution Thunes also struck a partnership with China Construction Bank (NASDAQ: CICHY) on the use of the CBDC in collecting payments and outbound cross border remittances for Chinese students living overseas, according to a local news outlet.

However, while Thunes has confirmed in an official statement that it is working on cross-border payment solutions with China Construction Bank, it did not mention using the digital yuan in the process.

China’s retail CBDC rollout gathers steam

China’s attempts to roll out a retail CBDC have gathered significant steam despite hitting a plateau early in the year. The combined efforts of the PBoC and provincial authorities have seen the CBDC pique the interest of local merchants, tourists, and international financial service providers.

The recent settlement of an international oil transaction with digital yuan has been construed as a clear statement of intent, laying the foundation for even more daring CBDC-backed cross-border transactions. Locally, the PBOoC is keen on expanding the retail use cases for the CBDC to match existing payment alternatives in the industry.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: Building CBDC systems on Bitcoin