China and Hong Kong have completed the first cross-border test of the digital yuan, officials from the People’s Bank of China announced Thursday (April 1).
According to Cointelegraph, the project by the bank and the Hong Kong Monetary Authority involved technical tests of cross-border use of the digital yuan, the digital currency of China’s central bank.
It’s a leap forward for China’s central bank digital currency (CDBC) development. The digital yuan was unveiled in pilot program last year, and China quickly began looking to move its expertise in this currency beyond its borders, exploring a cross-border CBDC with countries like Hong Kong, Thailand and the United Arab Emirates.
Other countries are working on their own versions of the digital currencies. According to the Bank for International Settlements (BIS), about 80 percent of the 65 banks they surveyed have a digital currency in the works.
Two central banks — the Bahamas and the Eastern Caribbean Central Bank — have made their digital currency public thus far.
China has recently proposed a set of rules governing CBDCs, with People’s Bank of China Director General of the Digital Currency Institute Mu Changchun presenting the proposed rules at a recent BIS seminar. Those rules would oversee how CBDCs could be used and monitored and how data on their usage could be collected. Changchun has said that CBDC’s should be interoperable, and that data flow should be synchronized to help regulators monitor those transactions.
Cross-border digital currency payments represent a big opportunity for businesses. Cross-border trade accounts for $10 trillion of the $120 trillion in payments that flow between trading partners around the world each year.
With that trading comes different challenges, such as paper-based workflows, delays in payments and a lack of faster payments alternatives.