Shanghai Clearing House floats digital yuan services for commodity trading

The Shanghai Clearing House has announced the launch of digital yuan clearing and settlement services for commodities in a leap toward increased adoption of the central bank digital currency (CBDC).

In a statement, the financial services clearing firm noted it will adjust its operational hours. Details from the official statement suggest that the Shanghai Clearing House will not charge customers additional fees for relying on the digital yuan.

“At the same time, in order to reflect the design concept of digital renminbi inclusive finance, the digital currency clearing and settlement service is temporarily free of charge,” the statement read.

Another seismic change of the new regime is abolishing the 2022 “Guidelines for the Spot Clearing Business of Bulk Commodities” in favor of a revised edition in May 2023. Experts have since hailed the move for its potential in improving the cross-border settlements of commodity transactions, given China’s position as a leading player in the industry.

Dong Dengxin, a director of the Finance and Securities Institute of the Wuhan University of Science and Technology, stated that applying the digital yuan will “facilitate the internationalization of the Chinese currency” while solving the nagging challenge of a unified clearing system.

However, this is not the first time that the CBDC will be deployed in commodity trading. Back in October 2022, Shandong International Commodity Exchange processed a $138,000 rubber deal in digital yuan. In January 2023, the digital yuan made its debut in securities after Soochow Securities facilitated a transaction via the digital yuan mobile wallet.

The People’s Bank of China (PBoC) is keen on improving retail and institutional adoption of the digital yuan following a plateau in adoption metrics since the start of the year.

Ramping up efforts ahead of full rollout

Amid concerns about waning public interest in the digital yuan, the PBoC has expanded the CBDC pilot to more Chinese cities ahead of a full-scale launch. However, the offering still faces stiff competition from existing payment options like Alipay and WeChat Pay.

To close the yawning gap, the PBoC is lacing its CBDC with many functionalities, including offline payments, smart contract abilities, and the prospects of cross-border payments. Several Chinese cities are seizing the initiative to pay staff salaries in digital yuan, while others have begun collecting taxes and payment of utilities in the CBDC.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

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