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In a significant milestone for the digital yuan, the Shanghai Petroleum and Natural Gas Exchange (SHPGX) has confirmed the use of China’s Central Bank Digital Currency (CBDC) for cross-border trade.
PetroChina International’s Historic Purchase
On October 19, PetroChina International executed a historic transaction, purchasing one million barrels of crude oil using the digital yuan. This transaction came in response to a call by the Shanghai Municipal Party Committee and Municipal Government to apply the CBDC to international trade, underlining the digital yuan’s growing role in cross-border commerce.
Although the specific seller and the price of the crude oil transaction were not disclosed, the “OPEC basket” of oil from 13 producers was priced at $95.72 per barrel on the same day.
However, the lack of specific details in the announcement leaves room for speculation about the exact terms of the transaction.
Boosting Digital Yuan’s Globally
This oil transaction is part of a broader effort to expand the use of the yuan on the international stage and advance the global shift away from the dominance of the US dollar. According to China Daily, in the first three quarters of 2023, cross-border settlements denominated in yuan surged by 35% year-on-year, reaching a staggering $1.39 trillion. This growth emphasizes the increasing acceptance of the digital yuan in international commerce.
On the same day as the historic crude oil purchase, First Abu Dhabi Bank announced an agreement with the Bank of China to explore the use of digital currencies. Both nations are participants in the mBridge platform, designed to facilitate cross-border transactions using CBDC.
Evolution Of Digital Yuan
The digital yuan, often referred to as e-CNY, began its pilot phase in January 2022, making it one of the first Central Bank Digital Currencies to launch on both Android and iOS platforms. Notably, it made its debut in March 2022 when French energy company TotalEnergies agreed to sell liquefied natural gas (LNG) to the China National Offshore Oil Corporation (CNOOC).
Over the following year, the digital yuan has seen remarkable progress, with approximately 13.61 billion digital yuan in circulation, representing around 0.13% of the monetary supply. Its use expanded into China’s Belt and Road Initiative, various consumer airdrops, and as a payment method for everyday transportation.
While many nations are exploring the development of their own Central Bank Digital Currencies, China’s digital yuan has emerged as one of the most advanced. By the end of June, transactions using the digital yuan had reached a staggering 1.8 trillion yuan (equivalent to $250 billion), constituting 0.16% of the cash in circulation.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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