- China uses digital RMB for cross-border gold and iron ore payments, leading innovation in international trade with CBDC.
- Bank of China transacts metals with digital RMB, marking a milestone in the adoption of digital currencies.
The recent news that China has used its digital currency, the digital RMB, for cross-border payments of precious metals, such as gold and iron ore, is a clear sign of the growing acceptance and functionality of centralbank digital currencies (CBDCs) in international trade. Can you imagine conducting international transactions with a digital currency issued by your country’s central bank? Well, China is already doing it.
The Bank of China, which is the country’s second largest bank and one of the big four state-owned banks, has worked together with the Shanghai Gold Exchange to facilitate the settlement of a gold trade valued at RMB 100 million (about $14 million).
The transaction was between Shanghai and Hong Kong, also involving the Bank of China Hong Kong. But that’s not all, recently, the Bank of China participated in a cross-border transaction for iron ore, involving Hong Kong and Baowu, China’s state-owned iron and steel company.
Meanwhile, the first cross-border use of China’s digital yuan for a commodity payment was in October, when PetroChina used CBDC. It is important to note that all of the above organizations are owned by the Chinese state. According to the World Bank, in 2017, Chinese state-owned enterprises accounted for between 23% and 28% of the country’s GDP. With such figures, the success of a CBDC seems almost guaranteed.
what does all this imply for the future of cryptocurrencies and digital payments?
The adoption of a CBDC by an economic powerhouse like China could set an important precedent in the use of digital currencies in international trade. In addition, China signed a formal agreement with the United Arab Emirates for digital RMB collaboration.
The UAE is also involved in the mBridge project, a wholesale CBDC solution for cross-border payments that integrates with retail digital RMB. MBridge is expected to launch a minimum viable product by mid-2024.
This not only shows how seriously China is taking its digital currency, but also how it is positioning the digital RMB to be a key player in international trade and cross-border payments. With the integration of digital RMB into platforms such as mBridge, China is leading the way into a new era of digitized trade and efficient cross-border payments.
The use of digital RMB for cross-border precious metal payments is a significant step in the evolution of digital currencies issued by central banks. It is not only symptomatic of the growing confidence and viability of CBDCs, but also highlights the potential of these currencies to transform international trade and cross-border payments.
With China leading the way, the incursion of CBDCs into global markets could be a game changer in the financial world, ushering in a new era in the digitization of money and international trade.
