Digital Yuan Update: Bank of China drafts BNP Paribas to enhance Digital Yuan

Lee Hills, CEO

BNP Paribas, a French banking leader, is joining forces with the Bank of China (BOC) to facilitate the use of China’s digital currency, the digital yuan (e-CNY), among its corporate clients, as reported by the South China Morning Post.

This partnership is a signifiant milestone since China’s Central Bank spearheaded a pilot of the digital yuan for those with accounts in majority state-owned banks in 2020.

The alliance will allow BNP Paribas China’s corporate customers to access the BOC platform, empowering them to manage their digital yuan wallets by connecting them to their bank accounts, monitoring transactions, and making payments using China’s digital currency through an e-CNY management system.

The system aims to streamline and improve the user experience for clients when utilising digital cash for real-time transactions.

Central Bank Digital Currency

The digital yuan is a Central Bank Digital Currency (CBDC) backed by the Chinese government, which is actively promoting its use as a means to reduce the country’s reliance on physical cash and enhance the efficiency of financial transactions. In contrast to decentralised cryptocurrencies like Bitcoin, the digital yuan is more similar to Stablecoins in terms of trust and security, though it is directly susceptible to quantitative easing.

Digital Currency Electronic Payment

The People’s Bank of China’s digital currency electronic payment (DCEP) app, launched in April 2021, now allows users to send digital yuan as gifts to other users. This gifting feature marks a significant development in expanding the use cases of the digital yuan beyond purchases and bill payments, potentially increasing its popularity and promoting wider adoption.

Further Developments

BNP Paribas China is also exploring other applications for China’s CBDC, such as smart contracts, supply chain financing, utility, and cross-border payments.

The ongoing expansion and adoption of the digital yuan, alongside its integration into BNP Paribas China’s corporate services, exemplify the rapidly evolving landscape for CBDCs and Stablecoins.

However, the rise of CBDCs like the digital yuan may have wider ramifications for the global economy, including challenging the status of the US Dollar as the global currency reserve. Many argue that the growing prominence of CBDCs underscores the need for decentralised alternatives like Bitcoin, and it will be intriguing to see how the landscape for CBDCs and Stablecoins continues to develop in 2023.