e-CNY widely adopted, WeChat and Alipay enabled, even the Paris branch of a French bank offers services

According to a report by the Atlantic Council, currently, 120 countries are studying the feasibility of central bank digital currencies (CBDCs), with China being one of the countries that has started early and actively developed in this area. Especially, China has begun to use the renminbi for trade payments with its major trading partners and actively promotes the digital renminbi (e-CNY) domestically and internationally. This has raised questions about whether the role of the US dollar as the world's reserve currency will be replaced by the renminbi. Let's take a look at the recent developments of e-CNY!

Hong Kong to Become International Offshore Renminbi Trading Center

According to a report by the South China Morning Post, Bank of China Hong Kong, one of Hong Kong's three note-issuing banks, was the first to promote the use of digital Renminbi (e-CNY) at the end of last year. The bank offered its registered customers HKD 100 worth of e-CNY as a red packet incentive, which could be used to purchase goods at 14 physical stores of the U Select chain of supermarkets across the city.

The Chief Executive of the Hong Kong Monetary Authority, Eddie Yue, stated:

The pilot test of e-CNY will be an important step for Hong Kong to strengthen its role as an international offshore Renminbi trading center. Hong Kong will soon launch a pilot program for using e-CNY for shopping and dining in the city, making it the first offshore city outside mainland China to use this digital currency.

The pilot will initially focus on retail payments and then expand to wholesale transactions in a later stage.

The International Clearing Bank Innovation Center in Hong Kong, the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Research Institute of the People's Bank of China, and the Central Bank of the United Arab Emirates are jointly creating a platform for multiple CBDCs called mBridge project.

For more e-CNY application scenarios, please see: Cities along China's Belt and Road Initiative promote digital Renminbi, while Hong Kong becomes a cross-border payment testbed.

Online Platforms Adopt e-CNY as Payment Option

Major online platforms in China, including the multipurpose super app WeChat, Alipay, JD, and the shopping platform Meituan, have all enabled e-CNY as a payment option.

In December 2022, Alipay announced integration with the e-CNY wallet application, allowing users of Alibaba's e-commerce platform to pay for products and services using e-CNY.

Subsequently, WeChat also added the use of e-CNY within its app. With over 1 billion users, this move could spark more interest in owning e-CNY.

BNP Paribas in Paris Begins Promoting e-CNY

According to a report by the South China Morning Post, BNP Paribas in Paris is collaborating with Bank of China (BOC) to enable its China branch to connect with the Bank of China system and introduce an electronic Renminbi management system for its corporate clients. So far, China has authorized 10 banks, all domestic banks, to handle their digital currency business.

BNP Paribas in Paris also plans to explore expanding the use of e-CNY into smart contracts, supply chain finance, utilities, and cross-border payments.

According to reports, e-CNY is being tested in 26 cities and regions across 17 provinces. It has been used for retail, transportation, and even salary payments. By the end of last year, the circulation volume of e-CNY had reached RMB 13.61 billion, approximately USD 2 billion.

China Uses e-CNY to Reduce Economic Dependence on the U.S.

China is one of the countries that have been actively developing central bank digital currency (CBDC) since the early stages. Many speculate that China is using e-CNY to reduce its economic dependence on the U.S. by starting to use Renminbi for payments with its major trading partners. Examples include settling liquefied natural gas transactions between France and China in Renminbi or trading between Brazil and China without using the U.S. dollar.

Another step is the promotion of the digital Renminbi, which is the central bank digital currency (CBDC) that the People's Bank of China has been testing since 2020. It allows for instant, free, and zero-risk payments globally, potentially replacing the U.S. dollar as a "hard currency" in regions like Africa.

Could the Renminbi replace the dominance of the U.S. dollar? See Arthur Hayes' perspective: Is the Era of U.S. Dollar Dominance Coming to an End? Arthur Hayes on the Future of Mainstream Currency.