The Bank of China Hong Kong, the second largest bank in the region, has completed its first cross-border digital yuan-based trade. The transaction, finalized with its sibling bank, the Bank of China, served to receive the payment for an imported iron ore commodity bulk trade, establishing the digital yuan as an option for this kind of settlement.
Bank of China Settles $3.4 Million in Bulk Commodities Using the Digital Yuan
The Bank of China has opened the path for companies to settle their cross-border payments using the Chinese central bank digital currency (CBDC), the digital yuan. The Hong Kong branch of the bank, the second-largest financial institution in the region, has achieved a milestone in serving as an intermediary for the settlement of a $3.4 million bulk commodity payment between Baosteel group, a steel and iron powerhouse, and Bao-trans Enterprises, a manufacturer of premium steel products.
The Hong Kong subsidiary and its mainland-based branch set up digital yuan wallets to support this transaction, receiving the funds in the name of Bao-trans Enterprises as a payment for an order of imported iron ore. According to local press reports, this is the first time the financial institution has acted as an intermediary for a commodity bulk settlement using the digital yuan.
Xing Guiwei, Bank of China Hong Kong deputy chief executive, praised the virtues of the Chinese CBDC in this kind of application. For Guiwei, the digital yuan can also be leveraged for the international settlements use case in addition to the retail payments scenario.
Guiwei stressed this application contributes to extending the use of the digital yuan at an international level. He explained:
The successful trial transaction can be helpful for the normalization of digital yuan usage among corporates and the further development of yuan internationalization.
China has been advancing in the internationalization of its digital currency, as Standard Chartered started offering digital yuan exchange services in China in November, and the People’s Bank of China (PBOC) partnered with the Monetary Authority of Singapore (MAS) to allow tourists of both countries to spend digital yuan.
What do you think about using digital yuan for cross-border commodities settlements? Tell us in the comments section below.
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