Chinese digital yuan CBDC used for first time to settle cross-border oil deal

October 23, 2023 Coin Telegraph

CBDC and de-dollarization saw major strides last week with the 1-million barrel deal on the Shanghai Petroleum and Natural Gas Exchange.

The digital yuan has been used for the first time to settle an oil transaction, the Shanghai Petroleum and Natural Gas Exchange (SHPGX) announced. PetroChina International bought 1 million barrels of crude on Oct. 19.

The transaction was a response to a call by the Shanghai Municipal Party Committee and Municipal Government to apply the Chinese central bank digital currency (CBDC), also referred to as the e-CNY, to international trade, the exchange said. It is “another major step forward” for the digital yuan, according to the state-controlled China Daily.

The seller and the price in the transaction were not disclosed. For comparison, the price of the “OPEC basket” of oil from 13 producers was $95.72 per barrel on Oct. 19.

The crude oil deal also marks an overall major step in the use of the yuan on the international market and in the global movement toward de-dollarization. In the first three quarters of 2023, use of the yuan in cross-border settlements was up 35% year-on-year, reaching $1.39 trillion, China Daily reported.

#DEDOLLARIZATION DAILY: PETRODOLLAR SHOCK

Shanghai Oil, Gas Exchange Settles First Cross-Border Trade in E-Yuan#DigitalYuan is a game changer!#fintech #finserv @psb_dc @efipm @baoshaoshan @thecyrusjanssen @lajohnstondr @Kathleen_Tyson_@DOualaalou https://t.co/8qT4Oq2X1o
— Richard Turrin (@richardturrin) October 22, 2023

The yuan was first used for a liquified natural gas (LNG) purchase on SHPGX in March when the French TotalEnergies agreed to sell LNG to the China National Offshore Oil Corporation (CNOOC). The second LNG deal in yuan occurred last week between CNOOC and French Engie. Those transactions did not involve the digital yuan.

Also on Oct. 19, First Abu Dhabi Bank announced that it had signed an agreement on digital currency with the Bank of China, the state-owned commercial bank, at the third Belt & Road Forum for International Corporation, which had ended a day before. China and the United Arab Emirates, of which Abu Dhabi is part, are participants in the mBridge platform to support cross-border transactions with CBDC. MBridge intends to launch as a minimum viable product next year.

Abu Dhabi signed an agreement with India in August to settle oil deals in rupees.

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Bank of China: Retailers must offer digital yuan payment option

September 4, 2023 Coin Telegraph

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In the short term, the e-commerce platforms can integrate the CBDC through QR codes.

While China’s central bank digital currency (CBDC) goes through technological and business model upgrades, the market should provide an opportunity to include it in all online retail payment options, according to a statement made by Changchun Mu, director of the Digital Currency Research Institute of the People’s Bank of China, on Sept. 3.

Giving a speech at the annual China International Service Trade Fair, Mu expressed the desire of digital yuan developers to see it at hand in every retail scenario. According to the official, Chinese CBDC, officially known as the renminbi, has “undergone a major upgrade” in terms of its “organizational forms” and business model. Now it’s the turn of the payment tools to be upgraded.

Mu mentioned commercial banks’ apps and such platforms as WeChat and Alipay, reminding them of their obligation to comply with regulations. In the short term, they can focus on implementing the QR codes for CBDC, while upgrading the payment tools in the long term.

The official brought up the wholesale payments issue as well. According to Mu, there is no need to completely change the current interbank payment and settlement systems. It would be enough to integrate the CBDC payment option into it. However, no technical details of such integration were mentioned during the speech.

China continues its work on the blockchain backed, yet fully controlled digital infrastructure. In August, Chinese government officials unveiled a new data exchange powered by blockchain. The newly established Hangzhou Data Exchange will streamline the exchange of corporate information technology data by leveraging distributed ledger technology.

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Bank of China Launches First Ever Tokenized Securities On Ethereum (ETH)

June 12, 2023 The Daily Hodl

BNP Paribas teams up with Bank of China to promote digital yuan usage

May 5, 2023 Coin Telegraph

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The partnership will enable BNP Paribas China’s corporate clients to make payments using the digital yuan through an e-CNY management system.

The French bank BNP Paribas is collaborating with the Bank of China (BOC) to promote China’s digital currency, the digital yuan, to its corporate clients, the South China Morning Post reported.

The partnership will enable BNP Paribas China’s corporate clients to connect with the BOC system, allowing users to manage their digital yuan wallets by linking them to their bank accounts, track transactions and make payments using China’s digital currency via an e-CNY management system. The management system also promises to make it easier and more convenient for clients to use digital cash for real-time transactions.

The digital yuan management system can facilitate “efficient, real-time and convenient [digital cash] practice,” BNP shared, according to The South China Morning Post.

BNP Paribas China also plans to explore the use of China’s central bank digital currency (CBDC) in other areas, such as smart contracts, supply chain finance, utility and cross-border payments.

To promote the adoption of its CBDC, China handed out millions of dollars worth of digital yuan across the country during the Lunar New Year period. A number of cities reportedly gave away over 180 million yuan, amounting to $26.5 million worth of CBDCs in programs such as subsidies and consumption coupons.

In April, local news reported that the Chinese city of Changshu notified all civil servants within its jurisdiction that they would be paid their full salaries in digital yuan starting in May 2023. The payment terms apply to all civil servants in the public service and other state-owned units in the city.

Despite the Chinese government’s efforts to promote the digital yuan, Hong Kong residents have not shown much enthusiasm for the government’s drive to promote the adoption of its CBDC. During the first four days of the hard launch of the digital yuan wallet, only 625 residents signed up, indicating a lukewarm response to the new digital currency offering.

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China’s state-affiliated banks onboarding crypto companies in Hong Kong

April 17, 2023 Coin Telegraph

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Chinese banks are opening bank accounts for regulated crypto companies, with several acting as a payment layer for the crypto platforms.

Hong Kong’s push to become a crypto hub has opened an opportunity for not just crypto companies but many state-affiliated banks in China. The Chinese banks have shown interest in building partnerships and onboarding regulated crypto companies in Hong Kong, despite a blanket bank on crypto-related activities in mainland China.

The Hong Kong arm of the major Chinese state-owned Bank of Communications is collaborating with several cryptocurrency businesses registered in the city. The bank is in talks to open accounts for regulated companies, according to a report published in The Wall Street Journal.

In addition to the Bank of Communications, ZA Bank — Hong Kong’s largest virtual bank controlled by Chinese internet insurer ZhongAn Online P&C Insurance — will also act as the settlement bank for the crypto companies. The banks will together facilitate the depositing and withdrawal of fiat currencies.

Along with providing account services to cryptocurrency businesses, these banks will serve as settlement banks to enable token deposits at authorized exchanges to be withdrawn in Hong Kong dollars, Chinese yuan and U.S. dollars.

At the start of the year, Hong Kong’s financial secretary Paul Chan clarified that the city is pushing to collaborate with more crypto firms in 2023. As a result of the government’s progressive crypto approach, nearly 80 cryptocurrency firms have shown interest in opening or expanding their business in the city. The government’s crypto push has attracted some surprising allies in the form of Chinese banks and funds.

As Cointelegraph reported, besides onboarding crypto companies and opening bank accounts for regulated firms, the Chinese government-backed CPIC Investment Management launched two crypto funds. CPIC is the second-largest insurance firm in mainland China, and its newly launched crypto funds are focused on institutional investors

China’s growing interest in crypto via Hong Kong has surprised many in the crypto ecosystem, as the country has carried out multiple crackdowns on crypto-related activities in mainland China.

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Hong Kong citizens not interested in digital yuan: Reports

March 2, 2023 Coin Telegraph

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Despite the 20% discount, the e-CNY hard wallets don’t attract much attention from the islanders.

The Chinese government’s beloved project of central bank digital currency (CBDC) has not sparked much enthusiasm in the citizens of Hong Kong. In the first four days since the “digital yuan” (also known as “e-CNY”) hard wallets became accessible to the islanders, only 625 Hongkongers had actually obtained them.

As reported by the local newspaper on Feb. 28, the city of Shenzhen installed the machines, dispensing the hard wallets for digital yuan, the first of a kind in the whole country. Due to the city’s unique location as a gateway from Hong Kong to mainland China, the machines were programmed to serve the citizens of Hong Kong exclusively.

The goal of the initiative, launched by the Bank of China and smart card provider Octopus Card, was to issue 50,000 hard wallets by March 31. However, during the first four days after the machines’ installation, only 625 wallets have actually been demanded by the customers.

Apparently, even the 20% discount on purchases from 1,400 local vendors, subsidized for the CBDC owners by the government, hasn’t become a decisive factor for the potential holders.

However, as the Securities Times highlights, the local authorities will continue their efforts to promote the digital yuan for Hong Kong citizens, including the project of a SIM-card hard wallet, which would combine the financial and communicational functions. The reason lies in a greater political mission to integrate the recently independent island city in the Guangdong–Hong Kong–Macao Greater Bay Area.

The adoption of e-CNY in the country is still rather slow, despite the Bank of China's efforts. In October 2022, two years after the CBDC’s introduction to the market, cumulative e-CNY transactions only crossed 100 billion yuan ($14 billion). In February 2023, during the Lunar New Year period, multiple cities reportedly gave away over 180 million yuan ($26.5 million) worth of the CBDC in programs such as subsidies and consumption coupons to boost the adoption.

Bank of China ex-advisor calls Beijing to reconsider crypto ban

February 2, 2023 Coin Telegraph

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The current crypto ban in China is beneficial in the short term, but there are big opportunities that can be missed in the long run, the economist argued.

The idea of lifting the cryptocurrency ban has started floating in China as a former central bank official has called the country to review its stringent crypto restrictions.

Huang Yiping, a former member of the monetary policy committee at the People’s Bank of China (PBoC), believes that the Chinese government should think again about whether the ban on cryptocurrency trading is sustainable in the long run.

Huang voiced his concerns about the future of fintech in China in a speech in December, according to a transcript published by the local financial website Sina Finance on Jan. 29.

The former official argued that a permanent ban on crypto could result in many missed opportunities for the formal financial system, including those related to blockchain and tokenization. Crypto-related technologies are “very valuable” to regulated financial systems, he stated, adding:

“Banning cryptocurrencies may be practical in the short term, but whether it is sustainable in the long run deserves an in-depth analysis,” Huang stated. He also highlighted the importance of developing a proper regulatory framework for crypto, though admitting that it won’t be an easy task. Huang said:

“There is no particularly good way to ensure stability and function as to how cryptocurrencies should be regulated, especially for a developing country, but ultimately an effective approach may still need to be found.”

Despite calling for an in-depth analysis of the potential long-term benefits of crypto for China, Huang still emphasized that there are many risks associated with cryptocurrencies like Bitcoin (BTC). Huang argued that Bitcoin is more like a digital asset rather than a currency because it lacks intrinsic value. Echoing a common anti-crypto narrative, he also claimed that a significant share of Bitcoin transactions is related to illegal transactions.

Huang, now an economics professor at Peking University’s National School of Development, also admitted that China’s central bank digital currency (CBDC) has failed to reach wide adoption despite being launched many years ago. He added that the possibility of allowing private institutions to issue stablecoins based on the digital yuan remains a “very sensitive” question, but the pros and cons are worth considering.

China has been long known for its “blockchain, not Bitcoin” stance, with Chinese President Xi Jinping calling the country to accelerate the adoption of blockchain as a core for innovation in 2019. At the same time, the Chinese government has shown some hostility to crypto, eventually banning virtually all crypto transactions in 2021.

Despite the ban, China has continued to be the second largest Bitcoin miner in the world as of January 2022, hinting at a large crypto community still existing in the country. According to official data, mainland China customers accounted for 8% of the collapsed crypto exchange FTX despite the country’s ban on crypto trading.

Some local crypto enthusiasts even believe that China has never really banned individuals from possessing or trading crypto.

Former Chinese central banker says digital yuan ‘usage has been low’

December 30, 2022 Coin Telegraph

Adoption

A former China central banker said cumulative e-CNY transactions only crossed $14 billion in two years, adding the results were “not ideal.”

A former official of the People’s Bank of China (PBOC), the country’s central bank, has expressed disappointment that China’s digital yuan is seeing little use.

Xie Ping, a former PBOC research director and current finance professor at Tsinghua University, made critical public comments about China’s central bank digital currency (CBDC) at a recent university conference, according to a Dec. 28 Caixin report.

Xie noted that cumulative digital yuan transactions had only crossed $14 billion (100 billion yuan) in October, two years after launch. “The results are not ideal,” he said, adding that “usage has been low, highly inactive.”

Despite the government’s rapid expansion of the trials and new wallet features to try to attract users, a January PBOC report stated that only 261 million users had set up an e-CNY wallet.

This compares to around 903.6 million people that utilize mobile payments in China, according to a 2021 China UnionPay report.

The former central banker said the use case of e-CNY “needs to be changed” from its current use as a cash substitute and opened to other uses such as the ability to pay for financial products or connected to more payment platforms to boost adoption.

He compared the digital yuan to other third-party payment systems in the country such as WeChat Pay, Alipay, and QQ Wallet, which allow for investments, lending or loans. He said they “have formed a payment market structure that has met needs for daily consumption.”

Some third-party financial apps are e-CNY compatible but see little use, as Xie said “people are used to” using the original service and change “is difficult.”

Such criticism of Chinese government initiatives is rare from former officials and signals the country may be seriously struggling to gain traction on its CBDC initiative.

The government has rapidly expanded e-CNY trails most recently in December to four new cities. It was previously expanded in September to Guangdong province, its most populous, and three others.

New features were added to the e-CNY wallet app in a bid to attract users in time for Chinese New Year that added functionality to send digital versions of traditional red packets or red envelopes (hongbao) containing money — a popular custom during festivities.

Wuhan omits NFTs from metaverse plan amid regulatory uncertainty in China

November 7, 2022 Coin Telegraph

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The Chinese government has shown a keen interest in developing a metaverse economy, but its stance on NFTs hasn’t been very clear.

The Chinese city of Wuhan had reportedly shelved its aspirational nonfungible tokens (NFTs) plans amid growing regulatory uncertainty around the crypto and Web3 technologies in the country.

Wuhan first announced its plans to support metaverse and NFTs in the aftermath of the coronavirus breakout as a measure to boost its economy ruined by the pandemic. The city was the epicenter of the COVID-19 breakout.

The Wuhan government’s draft industrial plan for the city’s metaverse economy development included a line about NFTs. However, that part has now been omitted from the latest version, according to a report by South China Morning Post. The report noted that the revised version still encourages businesses to focus on decentralized tech and Web3 but makes no mention of NFTs.

Under the newly revised plan, Wuhan aims to foster more than 200 metaverse companies and build at least two metaverse industrial estates by 2025.

Looking at the revised version of the draft, the Chinese government seems to do away with anything that involves the exchange of tokens or digital properties. The stance has been clear over the years as the government development plans have included metaverse-related technologies. For example, several Chinese cities, including the capital city of Beijing and Shanghai, have announced metaverse innovation plans, but any private business or tech giants involved with NFTs have faced government hostility.

At the start of the year, China was aiming to separate NFTs from cryptocurrencies in a bid to help the nascent industry grow despite a blanket ban on the latter. This resulted in a peak of interest among Chinese communities as NFT marketplace Opensea was flooded with listings from Shanghai during COVID lockdowns.

However, with the rise in popularity, the number of fraudulent activities rose as well, leading to several government warnings to investors against NFT trade.

China was very clear with its stance on crypto use in the country and eventually imposed a blanket ban in 2021 after several years of numerous restrictions. However, the government’s stance on emerging Web3 technologies, especially those that involve the exchange of tokens or digital collectibles (NFTs), seems far from clear at the moment.

Bank of China: Digital yuan transactions volume crossed $14B mark

October 13, 2022 Coin Telegraph

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The largest CBDC pilot in the world is going to expand on citizen payments and cross-border operations with Hong Kong.

China’s central bank digital currency (CBDC) project has reached the mark of 100.04 billion yuan (close to $14 billion) of made transactions during its pilot phase. It makes digital yuan, the e-CNY, the most widely adopted CBDC in the world.

As the Bank of China reported in the post on its official WeChat page on Oct. 10, by the end of the summer, the number of transactions made in 15 provinces within the CBDC pilot framework had reached 360 million. More than 5.6 million merchant stores already support the digital yuan as a legal tender, according to the post.

The pilot is expanding among some state institutions as well, covering a wide range of citizen payments:

“Multiple e-government service platforms have opened digital renminbi payment services, supporting online and offline channels to handle various public utility payments, using digital renminbi to issue tax rebate funds, special funds for monthly medical insurance payment, funds for helping people in need, and ‘specialized, special and new’ enterprise support funds, etc.”

The financial regulator shared its plans for the project development, which include launching the cross-border payments between Hong Kong and mainland China, actively exploring the multilateral cross-border option in collaboration with the Bank for International Settlement and following the principle of "anonymity for small amounts and traceability of large amounts" to protect the users’ personal data.

With its first CBDC trials launched in April 2020, China’s central bank has been aiming to eventually replace cash with the digital yuan. In September 2022, it shared plans to expand the deployment of the e-CNY to four of the country’s provinces, including Guangdong (earlier, the pilot ran only in separate cities).

Interestingly enough, the Bank of China reported about $13 billion (87.5 billion yuan) worth of transactions by January 2022 — with the fresh update, it could mean that in the last seven months, the overall amount of new transactions didn’t exceed $1 billion.

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