Revelations from the Central University of Finance and Economics in Beijing, suggest that China’s digital currency, the e-CNY, might soon see significant cross-border usage. With Vice President Li Jianjun himself suggesting that China’s marquee global infrastructure development strategy, the Belt-Road-Initiaive (BRI), also referred to as the “new Silk Road”, could find significant application for the Central Bank Digital Currency (CBDC).
The potential pros of using the e-CNY for cross-border transactions are manifold. As various analysts have speculated, China’s end goal seems to be using the CBDC to power cross-border trade. There are already examples where Chinese lenders have sanctioned debtors to swap local currencies for the yuan. The integration of e-CNY in such scenarios could streamline and boost China’s international trade initiatives. This ties in with China’s active participation in various international CBDC ‘bridge’ projects with other central banks.
However, the potential implication of such a move is not without its downside. The central People’s Bank of China (PBoC) initially insisted that the e-CNY was primarily a domestic project to boost financial inclusivity and provide non-cash alternatives for its unbanked population. Therefore, refocusing this effort towards cross-border trade has raised some eyebrows. Nevertheless, at least in theory, BRI regions might potentially benefit from the coin, given the increasing interest from the PBoC on broadening cross-border e-CNT uses.
Specifically, Sub-Saharan Africa, which has an unbanked population of up to 500 million individuals, may find itself in a pivotal position. Within the first half of 2023 alone, Chinese BRI investment in this region escalated by 130%.
In conclusion, while the fervor over digital currencies stems from their promise to advance inclusive growth and globalization, as claimed by Vice President of the University of International Business and Economics Hong Junjie, it’s essential to remember that they’re still a nascent and experimental form of finance that is far from being universally accepted and regulated. Building a digital governance platform is a moonshot initiative that may potentially alter the very fabric of global finance. But it goes without saying that it must be approached with due diligence to ensure it won’t compromise the inherent financial stability of the nations involved.
Source: Cryptonews
