- The Shanghai Clearing House, China’s largest central counterparty, will now support the use of the digital yuan for commodities transactions, expanding its CBDC initiative to wholesale use cases.
- Although adoption of the digital yuan is not mandatory, transaction settlement services will be initially free, as an incentive for its increased adoption.
China’s central bank digital currency (CBDC), the digital yuan, is steadily widening its reach by penetrating wholesale use cases. In a groundbreaking move, the Shanghai Clearing House, China’s principal central counterparty (CCP) for clearing and financial transactions payments, will now support the use of the digital yuan for commodities transactions.
While the adoption of the digital yuan remains voluntary, the Shanghai Clearing House aims to encourage its wider use by initially offering a free settlement service. This move represents a significant development as the clearing house is responsible for a vast array of financial transactions beyond stocks, including bonds, interest rate swaps, foreign exchange (FX), credit, and commodities. In the previous year, the CCP cleared a staggering RMB 552.6 trillion ($76.4 trillion) in transactions.
The utilization of the digital yuan has observed a mixed growth trajectory. The inclusion of high-value transactions in its purview implies that the forthcoming RMB figures are likely to exhibit a substantial hike. This is further corroborated by an earlier declaration of the digital currency’s usage for securities settlement, despite that being a relatively confined example compared to the largest central counterparty.
Official statistics for digital RMB adoption up until August 2022 have been released by the government. By the end of 2021, the number of personal wallets had soared to 261 million, although the wallet figure was not updated in 2022. The wallet growth was spurred, in part, by mass cash giveaways. The total transaction values swelled to RMB 100bn ($13.9bn) by the end of August 2022, reflecting a 20% escalation from the May 2022 figures.
The digital yuan’s ingress into the realm of commodity transactions solidifies its foothold in the world of digital currencies and signals China’s continuing push for its mainstream adoption. The wholesale use of the digital yuan through the Shanghai Clearing House showcases a significant stride in the integration of CBDCs in everyday financial transactions.