Digital RMB Progress Tracking Report

The digital renminbi pilot has made rapid progress, the number of personal wallets has exceeded 100 million, and the transaction amount has grown rapidly. The Central Bank of my country has begun to study legal digital currencies since 2014, and began piloting at the end of 2019. The current pilot scope covers ten cities and the 2022 Beijing Winter Olympics (10+1). The number of opened wallets and transaction amounts are growing rapidly . The cumulative number of digital RMB personal wallets opened increased from 20.87 million on June 30 to 140 million on October 22, and the transaction amount increased from 34.5 billion yuan (the same below) on June 30 to 62 billion. Judging from the data disclosed in the interim report of the listed banks participating in the digital renminbi pilot, the number of personal wallets opened by CCB is the largest, but ICBC has grown rapidly, with a total of 3.56 million personal wallets opened on June 30 and reached 15 million on August 29 indivual.

Exhibit 1: The  digital renminbi pilot is progressing rapidly

Digital RMB Progress Tracking Report

Source: Company information, “Digital RMB White Paper”, public news, compiled by Bank of Communications International

The digital renminbi is designed in three aspects to reduce concerns about deposit substitution and the impact on monetary policy. my country’s digital renminbi is designed to reduce negative impacts mainly through three aspects: the digital renminbi is positioned as M0 and does not pay interest; it adopts a two-tier operating system and the central bank is in a centralized position; and it sets up institutional friction on transactions. Due to the programmability of digital renminbi, by loading smart contracts, the accuracy of targeted monetary policy can be improved. We expect that digital renminbi can make up for the current lack of monetary policy transmission mechanism in the future, and enhance the effectiveness and intelligence of monetary policy and supervision.

The digital renminbi currently mainly meets domestic retail demand, but it has been tested for its use in cross-border payments through the mCBDC Bridge. It is expected that the time for cross-border payments may be earlier than market expectations. The Central Bank of my country has jointly initiated the multilateral central bank digital currency bridge (mCBDC bridge) project with the Bank for International Settlements, the Bank of Thailand, the UAE Central Bank and the Hong Kong Monetary Authority. The currency bridge test platform has proved that the use of central bank digital currencies can significantly increase the speed of cross-border payments. It takes several days to upgrade to near real-time, and can significantly reduce costs. Among the 15 commercial use cases, the international trade settlement use case has been tested on the platform, and it is expected to enter the pilot phase in 2022. The goal is to develop a system that can support the entire international trade settlement process.

Figure 2: Multilateral central bank digital currency bridge project

Digital RMB Progress Tracking Report

Source: Hong Kong Monetary Authority

It is expected that the digital renminbi will further accelerate the promotion and use, give play to its inclusive characteristics, and help inclusive finance and green finance. According to President Yi Gang’s recent speech, the next step will be to “improve the construction of the digital renminbi ecosystem and enhance the inclusiveness and availability of digital renminbi.” The digital renminbi itself has inclusive features in design. In terms of availability, it is expected that by building a distributed digital identity authentication system, it is expected to provide digital financial identity recognition and authentication services for a wider group of people. Recently, Xiong’an New District mentioned the promotion of digital renminbi from five aspects: digital renminbi + inclusive finance, rural revitalization, financial technology, green cities, and smart cities. We expect the digital renminbi will further accelerate the promotion and use in the future, and combine it with the national strategy of common prosperity and green finance to help inclusive finance and green finance.

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