China signs 26 banks to digital yuan, advances mBridge

Getting your Trinity Audio player ready...

China is advancing its digital currency game with 26 financial institutions signing direct participant agreements for the digital yuan cross-border payment platform, and updates on the mBridge commercial rollout.

China signs up 26 financial institutions for digital yuan operation

On June 16, China’s digital yuan operation center signed agreements with 26 financial institutions in Shanghai, aiming to enhance low-cost, efficient cross-border payments and promote the global adoption of the Chinese yuan.

The international operation center was established and managed by the People’s Bank of China (PBOC), and the agreement will allow participants to join the Cross-Border e-CNY Transfer Services (CBETS), a cross-border settlement platform that supports 24/7 digital payment links to foreign central banks and overseas financial institutions. Standard Chartered Bank (China) (NASDAQ: SCBFF) will be one of the first foreign banks to join and sign up with CBETs.

“Fintech is fundamentally reshaping the underlying logic of cross-border payments and providing new momentum and pathways for ​them,” Jean Lu, CEO of Standard Chartered Bank (China), said. “An efficient, convenient, and compliant cross-border payment experience ‌will ⁠further enhance the international use of the yuan.”

The country’s central bank is aiming to increase the use of digital yuan domestically and internationally, sources told Reuters. They add that Beijing is setting a different course and is potentially competing with the United States in shaping the future of money.

In March, the country also approved 12 banks to handle its digital yuan, as its capital, Beijing, aims to promote the use of the digital currency.

China details commercial rollout of mBridge digital currency program

In related news, the Financial Times reported that China is progressing the commercial rollout of a digital currency program that would boost cross-border transactions, reduce reliance on the U.S. dollar, and draw Beijing closer to its “Belt and Road” trading partners.

The mBridge platform is backed by central banks across mainland China, Hong Kong, Thailand, the United Arab Emirates (UAE), and Saudi Arabia. A Hong Kong-based entity will take on oversight of its operations, people familiar with the matter said.

At the time of writing, the exact date of the commercial launch hasn’t been revealed, but preparations are said to be advanced and fees would be half those of conventional international payment systems.

The country’s efforts to increase the global use of its currency have been boosted by the recently concluded war in Iran, with the adoption of Beijing’s renminbi cross-border clearing and payment system (CIPS)—China’s version of SWIFT—surging since the war. However, the mBridge is a separate, complementary system designed to improve the use of digital renminbi.

The project also comes amid growing traction for other regional payment systems. Programs such as the European Central Bank’s (ECB) SEPA and Ant Group’s cross-border QR code network also aim to enable faster, low-cost real-time payments for tourists in the country.

The mBridge cross-border project over the years

The mBridge project began with an earlier initiative between the Hong Kong Monetary Authority (HKMA) and the Bank of Thailand (BOT), formerly called “Inthanon-LionRock.” It took on its current form and name in 2021 when the Bank for International Settlements (BIS), Dubai, China, and the UAE’s central bank got involved with the project.

By 2024, the BIS handed the mBridge over to its partners, a decision the FT reported was due to pressure from the United States. However, BIS’s former general manager, Agustín Carstens, denied it.

Currently, the mBridge platform is being led by Beijing. It uses blockchain technology to enable transactions between central banks using their own digital currencies. With its current design, commercial banks can participate in mBridge transactions under their central banks’ supervision. To date, the platform has processed about RMB 470 billion ($69 billion) in transactions.

“For exporters, [mBridge] speeds up cash turnover and reduces the risk of liquidity strains,” Wang Jian, chief financial sector analyst at Guosen Securities, said. “More broadly, it could strengthen China’s voice in the global monetary order and support the internationalisation of the renminbi.”

Watch: CBDCs, Sovereign Nodes Driving Blockchain Adoption Globally