French bank BNP Paribas (BNP) is encouraging the usage of China’s digital yuan by connecting wallets to bank accounts. As per reports, corporate clients of BNP Paribas will be able to access China’s central bank digital currency (CBDC), via the Bank of China (BOC). The Bank of China is one of the eight banks permitted to handle digital currency transactions in the country. For effective real-time use of the CBDC, the system will link clients’ digital yuan wallets to their bank accounts.
Moreover, the bank will also investigate the use of the CBDC for cross-border payments, supply chain financing, and smart contracts.
Will China’s Yuan become a global standard?
The development of the digital yuan in China is the most advanced among CBDC initiatives in major economies. The testing period for China’s digital currency began almost three years ago, in 2020. However, in January the People’s Bank of China said that the digital yuan makes up 0.13% of the entire amount of currency in circulation.
Fears of China’s Yuan replacing the U.S. Dollar have gripped many countries with fear. There is a serious question mark on whether the Dollar will continue its reign as king. Moreover, according to a Reuters report, India and Russia’s discussions for using the Indian Rupee for trade have apparently been halted. Russia allegedly wants to do business using China’s Yuan, which has more demand than the Rupee. However, some officials have thwarted the report, calling it “wishful thinking” by Western media. One official stated that there has been “No change in bilateral developments.”
Nonetheless, a majority of global trade is still carried out using the U.S. Dollar. Although the Yuan is making big strides in global trade, it only accounts for a small percentage of global transactions. Dethroning the Dollar will likely not happen for a long time, although the fears around it happening are very real.