As geopolitical tensions rise, Beijing’s efforts to internationalise the yuan are making progress. On Friday, the president of Hong Kong’s de facto central bank said that the city will let mainland China’s experimental digital currency to be used in local stores.

With the support of Beijing, the scheme will enable citizens of mainland China and Hong Kong to create digital wallets using a smartphone app created by China’s central bank. They will also be able to use these wallets to make purchases at physical stores and select online retailers in both mainland China and Hong Kong.

As of the end of June 2023, 120 million digital wallets had been established, and transactions utilising e-CNY—which are mostly for domestic retail payments in China—had reached 1.8 trillion yuan ($249.27 billion), says the most recent report from China’s central bank.  

Users may pay at more than 10 million retailers across 17 provinces and cities on the mainland by using the wallet.

The Hong Kong Monetary Authority stated that each wallet used in the city will have a 10,000 yuan balance limit, with daily and single transaction caps of 5,000 yuan and 2,000 yuan, respectively.

The HKMA has said that peer-to-peer transactions will not be permitted at this time.

“By expanding the e-CNY pilot in Hong Kong .. users may now top up their wallets anytime, anywhere without having to open a mainland bank account, thereby facilitating merchant payments in the mainland by Hong Kong residents,” HKMA Chief Eddie Yue said.

Currently, payments may be made in the city using users of other digital yuan wallets, such those run by Tencent and Ant Group.

The e-CNY wallet operators include Bank of Communications Co., Bank of China Ltd., China Construction Bank Corp., and Industrial and Commercial Bank of China.

The yuan has steadily increased in value, although its role in international finance is still relatively minimal.

(Adapted from ThePrint.in)

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