China Tests Digital Cenbank Currencies for Cross-Border Settlement

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China Tests Digital Cenbank Currencies for Cross-Border Settlement
Chinese President Xi Jinping delivers a speech at a meeting commending role models of the Beijing 2022 Olympic and Paralympic Winter Games, at the Great Hall of the People in Beijing, China April 8, 2022. REUTERS/Florence Lo – RC2RIT993BUJ

The Bank for International Settlements (BIS) said that a central bank digital currency pilot focused on cross-border transactions has been completed, with Chinese state-owned banks participating as Beijing strives to internationalise the digital yuan.

The BIS stated in a statement that the first trial including four central bank currencies and real-value transactions involved more than 160 cross-border payments and foreign currency transactions worth more than $22 million.

This scenario occurs while capital is leaving emerging nations and the U.S. currency is strengthening against other currencies, endangering the stability of those economies.

The BIS developed the multiple Central Bank Digital Currency (mCBDC) Bridge test, which involved China, Hong Kong, Thailand, and the United Arab Emirates, with the goal of delivering real-time, less expensive, and safer cross-border payments and settlements.

Bank of Communications announced that the mCBDC Bridge test to settle payments for business customers had been successfully completed by it and four other Chinese banks.

China has been experimenting with its digital currency in key cities, primarily for domestic retail purchases, though the central bank has also promised to look into cross-border transactions using digital yuan.

The second-largest economy in the world has declared its willingness to consider establishing universal rules for virtual fiat money as the global monetary system matures.

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