Chinese national digital currency has been used to facilitate transactions in the country’s futures market for the first time, the China Securities Journal reported on Monday.
The commodities exchange in Dalian utilized the digital yuan for the payment of storage fees with help from major banks.
Dalian and two major banks took part in the trial to kick off the new phase of digital currency usage.
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For the first time, China is using the digital yuan payments in the domestic futures market after having conducted successful trials in other areas of currency usage.
The central bank digital currency (CBDC) has been used by the Dalian Commodity Exchange (DCE) for the payment of storage fees to a delivery warehouse. The local branches of Bank of Communications and Bank of China supported the transaction according to the report.
The application of e-CNY in the futures market provided an efficient, zero-cost and safe payment alternative for futures exchanges and market participants through real-time inter-bank payment.
A digital yuan payment has no transaction fees and “is not restricted to the operation period of the high-value payment system,” noted Jiang Bin, manager of the delivery warehouse. In addition to these features, the digital yuan would also bring convenience to Chinese enterprises by showing real-time transaction progress.
The DCE further emphasized it will continue to promote business innovation in the region. The commodities exchange plans to expand the use of the digital yuan while at the same time “ensuring a safe and stable operation in the market.”
In the past couple of years, China has been actively testing the digital currency issued by the People’s Bank of China. The government has launched multiple e-CNY pilots across the country with the digital yuan finding applications in over 1.32 million scenarios as of June 30. These range from utility payments, shopping, and catering to transportation and government services. Dalian joined the trials in November 2020.
Authorities in five other major cities – Shenzhen, Suzhou, Beijing, Chengdu, and Shanghai – have dispersed around $35 million of digital yuan in red envelope campaigns, a report by the Tuoluo Research Institute revealed in July. That’s from a total of over $41 million in e-CNY distributed among Chinese citizens nationwide.
Using the e-yuan in the futures shows how close China is to fully launching the digital currency, which has been touted as a government-backed alternative to cryptocurrencies that Beijing has cracked down on since earlier this year.
It is not yet clear how many other areas the government plans to conduct trials before launching the e-yuan, but China has shown unwavering determination to roll out the digital currency as soon as possible. In February, the south Asian giant teamed up with Hong Kong, Thailand, UAE and the Bank of International Settlements (BIS) to explore cross-border payments for digital currencies.
The aim of the move is to internationalize the e-yuan, creating a new path to promote its use in global payments, and possibly challenging the US dollar’s position as the world’s dominant reserve currency.
Although the US, UK and Japan have been rattled by China’s move and are working to create their own digital currencies, they are slow-paced and have recorded little or no success compared to e-yuan. With a wave of international interest in e-yuan-facilitated cross-border payments, the success of its trials in China increases its chances of being the world’s dominant digital currency.