China nears end of its multi-year CBDC pilot, ex-PBoC governor says

China is on track with its central bank digital currency trial as final stages are ‘not very far away,’ says ex-PBoC governor.

China is approaching the end of its multi-year digital yuan pilot as the “final stage is not very far away,” said Zhou Xiaochuan, who ruled the People’s Bank of China (PBoC) for 16 years up to 2018.

According to a report from the South China Morning Post, the former Governor of PBoC noted in his speech at a conference in Hong Kong that the country has already digitized up to 90% of retail payments. Xiaochuan also addressed the international use of central bank digital currencies (CBDCs), saying cross-border payments are a “big business opportunity for many central bankers to consider and to explore.”

In addition to international payments, there are also cases where CBDCs could be used for assets tokenization through smart contracts, Xiaochuan said without elaborating on the matter.

You might also like: Standard Chartered China provides digital yuan exchange services

China has been working on its digital yuan also known as e-CNY since 2014, when it set up a task force to study digital fiat currency.

And it seems that Beijing is betting big on the digitization.

In early November 2023, an official for PBoC revealed that the bank’s new project called “Money Bridge” will be based on a proprietary blockchain to deliver crucial services such as simultaneous foreign exchange and payment settlements, wallet administration, and safeguarding privacy.

The collaboration that kicked off in February 2021 has seen the Digital Currency Institute join forces with multiple central banks, including the Hong Kong Monetary Authority, the Bank of Thailand, and the Central Bank of the United Arab Emirates. They have aligned efforts to test and explore the applications of CBDCs in cross-border payment systems, under the guidance of the Innovation Hub.

Policymakers in the U.S., in the meantime, are trying to bar U.S. financial service operators from interacting with China’s CBDC.

Senator Rick Scott in early Nov. 2023 introduced the so-called Chinese CBDC Prohibition Act, which would ban U.S. post offices, remittance firms, peer-to-peer crowdfunding platforming and all money services businesses from facilitating any transaction that involves China’s digital yuan.

Read more: China FX regulator supports CBDC amid monetary policy
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