The Digital Yuan and Cross-Border Payments : China's Rollout of Its Central Bank Digital Currency

Monetary experts have referred to central bank digital currencies (CBDCs) as “the future of payments” or even “the future of money,” and not without reason. China’s launch of its digital yuan begins a new era in payments, making China the first major economy to deploy its own CBDC. After six years of research and development, the Chinese government announced its testing of the digital yuan (called e-CNY) within its digital currency electronic payment (DCEP) system. In addition to the domestic advantages of a digital yuan, China has laid the groundwork to launch the digital yuan internationally, by signing a Regional Comprehensive Economic Partnership (RCEP) agreement, forming a joint venture between People’s Bank of China (PBOC) and the Society for Worldwide Interbank Financial Telecommunication (SWIFT), and testing e-CNY in Hong Kong.The domestic and cross-border tests proved so successful that the PBOC released digital yuan wallet applications for Android and iOS in early January 2022. On the day of the opening ceremony of the Beijing 2022 Winter Olympics, more people used China’s DCEP than Visa for digital transactions there. Western policymakers have expressed concerns over China’s aspirations to internationalize the renminbi by expanding its DCEP, potentially allowing China’s security agencies to monitor the financial activity of foreign visitors, companies, or governments doing business in China or in its Belt and Road Initiative, or to bypass sanctions against some of the initiative’s members.9 This case study looks at how China might leverage the e-CNY to increase its influence in theglobal economy