China digital currency: BNP Paribas to promote digital yuan usage in China

BNP Paribas is partnering with Bank of China (BOC) to promote China's digital fiat money to its corporate clients, the French bank said in a statement on Thursday.

The collaboration allows BNP Paribas China to connect with BOC's system and launch an e-CNY management system for its corporate clients. China has so far authorised 10 banks, all domestic lenders, to handle its digital currency business.

The system can "link [the client's] digital yuan wallet to its bank account" to facilitate "efficient, real-time and convenient [digital cash] practice", BNP said in the statement.

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In addition, the French bank will explore expanding usage of China's central bank digital currency (CBDC), to smart contracts, supply chain finance, and for utility and cross-border payments, it said.

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"The collaboration has once again demonstrates our commitment to the China market, and we will continue to enhance our customer service capabilities through digital innovation and contribute to China's economic development," said BNP Paribas China chief executive CG Lai.

Wang Pengbo, senior financial analyst at consultancy BoTong Analysys, said that BNP Paribas China's new move "will help promote the digital yuan and increase the range of options for users".

BNP Paribas China follows in the footsteps of HSBC subsidiary Hang Seng Bank's mainland arm, which in 2021 partnered with China Construction Bank, one of the 10 authorised e-CNY agents, to offer similar services to its corporate clients.

Beijing started exploring a potential sovereign digital currency in 2014, and one of its missions was to allow unbanked people, including those travelling from overseas, access to digital finance in China, according to a 2021 report by the nation's central bank.

The fast expansion of e-CNY has forced foreign banks to rethink their strategies and consider the competitive advantage "once the digital yuan is used in cross-border business-to-business payment", according to a report by consultancy Oliver Wyman.

Last year, the mainland, Hong Kong, Thailand and United Arab Emirates completed a 40-day trial of China's digital currency, handling transactions worth over 150 million yuan (US$22 million) involving 20 commercial banks.

Domestically, the digital yuan, officially known as Digital Currency Electronic Payment, is being tested in 26 cities and regions across 17 provinces. It has been used in retail, transport and even for payment of salaries.

At the end of 2022, the amount of digital yuan in circulation reached 13.6 billion yuan, according to the latest data from the PBOC.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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