The Chinese government is planning on utilizing its state-owned banks and financial intermediaries to implement its planned CBDC, which central international commercial banks will also utilize. To execute profitable digital Yuan trade, you can check yuan pay group app. Their goal is that 80% of transactions will soon be processed via the system. For the last few years, China and Russia have been among North America’s most significant oil buyers.
The Chinese government has become increasingly involved in international banking transactions and has bought a significant stake in Sberbank, Russia’s largest bank. Last year, The New York Times words revealed the project of the Chinese government to create a CBDC that could be utilized by commercial banks internationally. Later in 2021, China just shocked everyone by launching the digital yuan, also named e-CNY.
The Hong Kong Monetary Authority (HKMA) is developing plans for a state-backed digital currency for use in Hong Kong that will be able to be exchanged for RMB. It differs from a CBDC as it will not be backed by international central banks or the Chinese government.
It is seen as a government agency, like the Bank of Canada, working with blockchain technology for applications such as digital currency. For example, the HKMA has worked to make it possible for commercial banks to build a trial application utilizing blockchain technology for retail payments.
Use of Digital Yuan in Supply Chain Management
It is difficult to predict the time it will take for something to pass through the supply chain, so operators usually do not know when they will be paid. Experts believe that e-CNY is a perfect solution in this case and that its use in a cash management system can reduce fraud on both sides.
In China, e-CNY is used to clear transactions between financial institutions in real-time and in seconds. In addition to transactions between financial institutions, merchants can use it for payments and settling transactions within their business processes. People primarily use the currency to facilitate clearing and settlement between banks and other financial institutions. People in a cash management system will also use it to reduce fraud on both sides and settle transactions between merchants and customers.
Blockchain Integrated With Digital Yuan
Trade finance accounts for close to $10 trillion every year yet is relatively slow at the moment, with seven days on average for a trade transaction to settle. Blockchain has the potential to change this process by providing all parties involved in a trade with secure access to the same information about the transaction, which will reduce time and cost from all sides.
Although there are plans to let the general public use e-CNY, it will be widely used by various Chinese financial services firms and many other global business partners. It is because the current value of the e-CNY is set based on traditional CNY, while its supply is currently more than 30 billion units. According to state media, however, this number will rise to 200 billion yuan by 2024.
To ensure that this currency can handle hundreds of millions of transactions per second in China and thousands of transactions per second internationally, the network is expected to handle more than 10,000 transactions per second.
E-CNY may compete with other major cryptocurrencies such as Bitcoin and Ethereum, so the price of e-CNY will significantly impact the global cryptocurrency market. Experts believe it may reach 18 trillion US dollars to compete with other cryptocurrencies in terms of value and applications. In an interview with Reuters, a senior official at the HKMA said, “This (digital yuan) has excellent prospects for becoming an international currency.“
Globalization of Supply Chain With Digital Yuan
The “One Belt, One Road” initiative launched by China in 2013 is a series of infrastructure projects that plans to boost economic development and trade between China and other countries. The initiative aims to improve connections between regions and increase the flow of goods, capital, technology and people.
According to the initiative, e-CNY will be widely used for payments relating to goods trade between China and various other countries along the “One Belt, One Road” route. It will enable payments quickly with low cost and increase efficiency in coordinating deliveries.
In addition, given its potential value as an international currency accepted worldwide, including in Europe or Africa, it can also reduce costs for these countries. The objective of e-CNY is to create a digital currency accepted internationally by all major financial institutions and adopted by businesses and consumers. As a result, it will reduce costs, benefiting all parties involved in purchases, payments and business activities.
Although the actual application of e-CNY is still being developed, it will generally be used in two ways: a wholesale payment system and a consumer payment system. These applications are currently being tested in China to have both applications worldwide by 2023. Merchants can settle transactions directly with customers and other merchants using this digital currency for payments between regions along the “One Belt, One Road” route.