https://arab.news/z4fjp
- Cut costs by 50%, takes seconds, says People’s Bank of China
- New trial comes as the digital yuan is facing problems at home
TOKYO: China has started a trial for cross-border payments using central bank digital currencies with Saudi Arabia, the UAE, and other partners as it looks at alternative uses for the digital yuan amid its struggles in the home market, Nikkei Asia has reported.
The CBDCs use blockchain technology to record transactions. They can allow cross-border payments to be completed within seconds and cut costs by up to 50 percent, according to the People’s Bank of China.
The central bank wants to promote interconnectivity in global financial infrastructure and the new trial aims to find solutions to issues that arise in cross-border settlements.
Currently, international payments pass through so-called correspondent banks based on orders placed via the SWIFT messaging platform. The process can take a few days to about a week.
Cross-border payments are also typically made in dollars. Low-cost transfers using CBDCs could help promote non-dollar transactions and reduce China’s dependence on the dollar.
Seven central banks — including in Japan, the US and Europe — also announced a joint trial for CBDC payments in April with private-sector partners.
The new trial comes as the digital yuan is facing problems at home. China has also experimented with using the digital yuan for salary and tax payments, and digital yuan transactions totaled 7 trillion yuan ($992 billion) at the end of June, according to the PBOC.
However, Chinese users see little advantage to the digital yuan over popular private-sector payment apps, such as WeChat Pay and Alipay. More than 80 percent of payment transactions in China are believed to be cashless.