China aims to become a worldwide blockchain giant, and the digital yuan plays a significant role in this plan. The digital yuan is the e-currency of china, and it is a fantastic thing. You can see how china is so on point regarding technology. It is the first-ever country to have its digital currency. But the fact is that if China wants to achieve its goals, then it also requires help from other countries. China is quietly testing its pilot digital currency on the other trading platforms of different nations. It is also setting up the legal framework for the digital yuan currency with worldwide financial regulators at the website below.
Suppose the digital yuan wants to get global-level adoption. China needs to work with its trading partners and the regional financial hubs to have a platform where this digital currency is lawfully and monetarily interoperable with the digital currencies of several nations. One such kind of platform is Inthanon lion rock, which is the central bank that issues digital currency projects for international payments. This project is initiated by the monetary authority of Hong Kong and the Bank of Thailand. Almost eight banks and two HK banks are participating in this project, and they are also testing the feasibility of transferring this digital currency between these countries.
As per the statement of the HKMA, the people bank of china and the central bank of UAE have participated in the second tier of this project, and the name of this project is Multiple Central Bank Digital Currency Bridge. This project aims to help the central banks facilitate cross-border and capital market transfers. The idea here is to alleviate the cost and the pain points of inefficiency while conducting cross-border transfers. This project is perfect for china as this country wants to internationalize their digital currency. According to the experts on the blockchain, china needs to negotiate with one Central bank at a particular time and then come up with a method for everything that starts from a legal framework to decide the exchange rates of the two different currencies.
Know about the wholesale shift!
You must understand that two elements have set the entire project apart from the other various projects of the digital yuan currency in china. First, however, these types of projects take place among only two countries with the help of bilateral collaboration. On the other hand, this bride also has a third party, that is, UAE. Another fact is that this complete project is wholesale-oriented. It is the thing that is a shift from the focus of china on the other retail use cases.
It is required to understand that the project will also explore potential businesses. It includes the cross-border fund’s transfer among the institutions and the banks instead of the individuals. The project will act as a corridor for China to expand its cross-border network for large financial firms. It will entice more and more central banks to join this network. They will do this by offering a competitive foreign exchange compared to the open market. It will also allow the other countries to borrow the currencies in a short period to increase liquidity.
What is the hub?
Some countries might be unwilling to trade the CBDC on the platform created by china because of privacy issues. To meet this issue, the Chinese central bank can also join the all-inclusive digital currency platform where the digital yuan is traded with other digital currencies in a hassle-free way. Singapore can become a great help to china in doing. Hence, it is because, in the year 2020, the managing director of MAS said they are welcome to collaborate with the central bank of china on the digital currency matter.
Since Temasek and JPMorgan are already working on this project, the idea here was for this financial hub to push more for getting highly efficient and significantly less expensive settlements to international countries. At the same time, hong kong is the place where china is going to start internationalizing its digital money. At the same time, Singapore is an excellent destination for cross-border settlement points.