Can a digital yuan challenge dollar dominance in trade finance?
Despite China’s ambitious plans for its digital currency, the e-yuan will struggle to become a lead player in international trade finance without notable changes, most importantly to capital controls.
In a presentation to the 18th annual global meeting of the International Finance Forum, Di Gang – deputy director of the Digital Currency Institute (DCI) of the People’s Bank of China (PBoC) – said his organization was taking the lead in developing a blockchain platform for trade finance.
The DCI is part of a joint venture with the Hong Kong Monetary Authority, Bank of Thailand and the Central Bank of the UAE to develop a multi-central bank digital currency (CBDC) platform for international payments, the latest phase of which will test business-use cases in international trade.
The real challenge is whether or not trading partners actually want to settle in RMB
This has long been a weakness of the renminbi (RMB). Swift’s latest RMB tracker shows that RMB payments value increased by 10.9% in January at a time when total payments decreased by 6.5%.