China's digital yuan, e-CNY, continues to gain traction with the addition of four banks to its pilot program, furthering its adoption for domestic and cross-border transactions.
HSBC, Hang Seng Bank, and Fubon Bank have all added e-CNY integrations to their platforms, following the British bank Standard Chartered, which announced its entry on November 27.
The banks joined over 40 state-owned banks that have already launched their e-CNY services through the app developed by the People's Bank of China's (PBOC) Digital Currency Research Institute.
"E-CNY is the new frontier of financial innovation in China. By actively participating in the pilot program, foreign banks have a better chance to increase their relevance in China's future banking business," said Li Ying, head of financial institution ratings at S&P Global (China) Ratings.
Clients of the participating banks will gain seamless access to e-CNY transactions, including withdrawals, sending and receiving funds, making online and offline payments and topping up digital wallets linked to existing bank cards or mobile banking accounts.
"As an important infrastructure for the digital economy, the e-CNY will enhance the payment and consumption experience and strengthen the connection between China and the international financial market," said Jerry Zhang, executive vice-chairman and CEO at Standard Chartered China.
Last month, PetroChina International settled a cross-border oil purchase using the e-CNY, marking the first official use of the CBDC for international trade. This milestone aligns with the broader growth of yuan-denominated cross-border settlements, which surged 35 percent year-on-year in the first three quarters of 2023, reaching $1.39 trillion, as reported by China Daily.
Looking ahead, Zhang said the e-CNY is poised to play an increasingly prominent role in merchant payments, trade finance, and supply chain finance.
In addition to the standard e-CNY features, the participating foreign banks are introducing various unique features.
Hang Seng Bank, for instance, now allows its personal banking customers to link their debit cards to the official e-CNY app and seamlessly redeem digital renminbi. In addition, customers can top up their digital renminbi wallets through the Hang Seng China Mobile Banking App. HSBC has also implemented similar features to enhance the retail e-CNY experience for its clients.
Meanwhile, Fubon Bank has integrated e-CNY recharge capabilities into its mobile banking platform, enabling users to top up their digital renminbi wallets easily. It also facilitates e-CNY spending through its bank cards. The bank said it is also exploring further applications of e-CNY in cross-border trade, smart contracts, cross-border payments and supply chain finance.
Collaboration of central banks and CBDCs
Apart from keeping up with China's e-CNY developments, foreign banks are actively pursuing opportunities related to Hong Kong's digital currency, e-HKD. Since May 2023, HSBC and Standard Chartered have been participating in an e-HKD trial run initiated by the Hong Kong Monetary Authority (HKMA).
The e-HKD pilot program is evaluating the digital currency's potential applications in six areas, including offline payments and tokenized deposits. To date, 16 banks and payment companies, including Alipay and Visa, are participating in the program.
Apart from advocating e-CNY and e-HKD for local transactions, central bankers are urging increased cooperation to advance digital currency use in cross-border payments.
Christopher Hui, Hong Kong's Secretary for Financial Services and the Treasury, has encouraged more Hong Kong banks to use China's digital yuan, following the steps of Hong Kong-based banking giants HSBC and Hang Seng Bank. He made this statement at the 2023 Shenzhen International Fintech Festival this week.
Hui also mentioned that the PBOC and the HKMA were collaborating in a "second phase of technical testing" to enhance the e-CNY's cross-border capabilities further. The government will establish the necessary "regulatory and compliance protocols to support innovative cross-border applications of the digital yuan."