The Chinese central bank’s financial services clearing counterparty, the Shanghai Clearing House, launched digital yuan (a CBDC) clearing and settlement services on Monday, July 26.
According to a June 26 announcement, the latest services enable cross-border settlements on commodities using the digital yuan. This move marks another step in China’s efforts to facilitate the institutional adoption of its Central Bank Digital Currency (CBDC).
China’s Digital Yuan Gains Utility In Commodities Settlement
The Shanghai Clearing House, which handles interest rates, bonds, foreign exchange, credit, and commodities, would be in charge of the center of these operations of the newly launched digital yuan clearing and settlement services.
Related Reading: This Analyst Predicts Bitcoin Will Hit $34,000 Following A Breakout
Director of the Finance and Securities Institute of the Wuhan University of Science, Dong Dengxin, said the development could boost the Chinese yuan (RMD)’s international adoption. The newly launched digital yuan clearing services could also improve the security and cost-effectiveness of cross-border commodities settlements in China.
This digital RMD clearing and settlement service isn’t China’s first time adopting the digital yuan for commodity trading though. In October 2022, the Shandon International Commodity Exchange promoted a ¥1 million settlement on imported rubber using digital yuan. That was the first digital yuan commodity trading transaction in the Qingdao area of China.
China Speedily Expands Its CBDC Adoption
The digital yuan’s retail usage is also expanding, following various efforts by the Chinese government to accelerate the CBDC pilot’s adoption. On June 20, Qingdao City launched the first digital yuan payments for urban rail transit fees. The move allowed users to pay for their subway transport fares from digital yuan hardware wallets embedded in their mobile SIM cards.
Again, on June 20, a leading online shopping platform in China, JD.com, reported increased digital yuan transactions during the 618 Festival. The 618 Festival is China’s second-largest and most celebrated shopping festival, held annually from June 1 to June 18.
JD.com said the 2023 618 Festival broke records with a 254% increase in CBDC transactions from the records of 2022. However, the online shopping platform did not disclose the specific amount of digital yuan transactions it recorded during the festival.
Other provinces in China have also held campaigns to promote the digital yuan adoption. In May, the Jiangsu Province announced it would facilitate CBDC payments for tuition and accommodation fees at public schools. The May 9 notice by the Jiangsu Province Department of Education also noted that students could use the digital yuan for on-campus purchases, examination registrations, and more.
The government plans to add more utilities to expand the CBDC adoption in educational institutions. The areas mentioned include scholarship issuance, tax payments, and school purchases.
Furthermore, two of China’s leading third-party payment platforms, Alipay and WeChat Pay, have added support for the CDBC. The platforms support the digital yuan for payment on over 109 mobile applications, including online gasoline and natural gas shopping.