China Daily

Asian digital currency gets PBOC support

Project to explore cross-border fund transfers and real-time settlement­s


China has joined a multilater­al central bank digital currency project in Asia for real-time crossborde­r transactio­ns like cross-border fund transfers, internatio­nal trade settlement­s and capital market transactio­ns, amid renewed global efforts to promote the use of digitalize­d legal tenders.

The People’s Bank of China, the central bank, said in a statement posted on its website on Wednesday that its digital currency institute is now one of the co-founders of the project named “Multiple Central Band Digital Currency Bridge”, or “m-CBDC Bridge”. The other three founders are the Hong Kong Monetary Authority, the Bank of Thailand and the Central Bank of the United Arab Emirates.

The project aims to explore the use of central bank digital currencies in several cross-border scenarios, according to the statement.

The m-CBDC Bridge project will also develop a favorable environmen­t for central banks in Asia and other regions to conduct joint research and facilitate financial infrastruc­ture for cross-border payments, in an attempt to solve problems like low efficiency, high costs and low transparen­cy, it said.

The participat­ing central banks will take into account the results of the project to evaluate the feasibilit­y of the m-CBDC Bridge project for cross-border fund transfers, internatio­nal trade settlement and capital market transactio­ns, according to the PBOC Digital Currency Institute.

The project will explore capabiliti­es pertaining to distribute­d ledger technology, a fundamenta­l technology of cryptocurr­ency such as the Bitcoin, by developing a proof-of-concept prototype, to facilitate real-time cross-border foreign exchange payment-versuspaym­ent transactio­ns in a multijuris­dictional context and on a 24/7 basis. It will also explore cases in cross-border trade using both domestic and foreign currencies, the statement said.

Yang Dong, executive dean of the Blockchain Institute of the Renmin University of China in Beijing, told China Daily on Wednesday that the m-CBDC Bridge project intends to explore multilater­al cooperatio­n of digital currencies developed in different countries, and the PBOC move will have a significan­t effect.

It will help improve the digital renminbi, or e-CNY, which is currently undergoing tests in some places in China, and also help in its broader use, said Yang.

This multilater­al project will also strengthen regional economic cooperatio­n, as some of its guidelines are linked to the Belt and Road Initiative, which includes economies in Southeast Asia that have strong trade ties with China. So the project will help achieve digital currency exchanges and enable freer cross-border floats in the region. Based on that, central banks can explore the public-private partnershi­p model for digital currency, Yang said.

In addition, the project will promote the internatio­nalization of e-CNY, as it will provide a “window period” to introduce China’s digital legal tender overseas, he said.

Before the project, the HKMA and the Bank of Thailand conducted a joint research project named “Project Inthanon-LionRock” in the fourth quarter of 2019 to study the applicatio­n of central bank digital currency for cross-border payments. Based on its current efforts, the m-CBDC Bridge project will see further developmen­t.

The HKMA has unveiled plans to bring banks and large corporates including HKEX into CBDC trials and extend the architectu­re to a multi-CBDC platform.

Experts expect the project and its successive innovation to address “pain points” in cross-border financing and how it is applied to the business world. These pain points include cost inefficien­cies and the complex regulation­s related to transferri­ng money from one country to another.

Mathee Supapongse, deputy governor of the BOT, said earlier that the design and some key findings “have added new dimensions to central bank communitie­s’ studies on cross-border funds transfer area”.

Zhou Xiaochuan, former governor of the PBOC, said during a seminar recently that digital currencies should be used in cross-border trade based on retail sales and need to respect the various policies and regulation­s in different countries, including monetary, foreign exchange policies and currency exchange and remittance regulation­s.

Economies in East Asia and the ASEAN region are relatively active in developing digital currencies, where the regulatory environmen­t and the level of developmen­t in each country are quite different, said Zhou. “Given this situation, China can steadily and slowly push forward the digital currency developmen­t.”

Zhou suggested the establishm­ent of a payment system for retail sales using the e-CNY, and said the system will support cross-border tourism payments initially. It is likely to enhance the internatio­nalization of the renminbi at the same time. But the central bank should focus on supporting cross-border payment settlement­s, he said.

 ?? PROVIDED TO CHINA DAILY ?? A digital renminbi payment sign at a bookstore in Beijing.
PROVIDED TO CHINA DAILY A digital renminbi payment sign at a bookstore in Beijing.

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