A state-owned Chinese bank, the Bank of China, is set to connect the digital yuan to the payment platform of what is referred to as the “world’s biggest small commodities market.” This initiative, characterized as a “cross-border” Central Bank Digital Currency (CBDC) effort, is a collaboration between the Bank of China and the city of Yiwu.
It’s important to note that the Bank of China, in this context, is a major commercial bank and is distinct from the central People’s Bank of China. The Bank of China is majority-owned by the Chinese state and is considered the world’s fourth-largest financial institution.
The project aims to link the digital yuan to the payment platform of Yiwu’s Futian District, located in Zhejiang Province, which is renowned for hosting a 7km-long market, described as the “world’s biggest small commodities market.”
The expansive market in Yiwu hosts thousands of vendors who retail various “small” commodities to importers worldwide.
As part of the collaboration with the Bank of China, digital yuan interoperability options will be integrated into the Yiwu Pay payment platform. Yiwu Pay, launched earlier this year, is described as a “global payment platform” with the capability to serve “100 countries and regions.”
The platform facilitates transactions in 16 fiat currencies, enabling both customers and vendors to conduct international payments, further enhancing its utility in the global market.
This development enables merchants to facilitate “cross-border payments” using the digital yuan. Additionally, it will integrate compliance solutions for “cross-border capital circulation” for digital Chinese Yuan (CNY) customers. The solution is designed to adhere to various foreign exchange compliance protocols.
According to the bank, this solution has already been “successfully implemented” by certain merchants based in Yiwu, showcasing practical application and adoption within the market.
Chinese Digital Yuan Making Cross-border Progress
This development follows Yiwu’s announcement a few months ago that 90% of its vendors were accepting digital yuan payments. The city declared that its market collectively aspired to handle approximately $1.5 billion worth of Central Bank Digital Currency (CBDC) transactions by the end of the year.
Yiwu, often unofficially referred to as the “world’s capital of small commodities,” is renowned for manufacturing and trading various items such as clothing, toys, household goods, smartphone accessories, and jewelry. The vendors in Yiwu have established trade relations with over 230 countries and regions globally, further underscoring the significance of the digital yuan’s integration into its payment systems.
While the physical Futian District marketplace in Yiwu continues to attract tourists, the city has been actively expanding its online presence. Yiwu has become a key supplier to numerous leading international e-commerce platforms in recent years.
This move aligns with broader efforts by Chinese banks to extend the use of the digital yuan into the cross-border payments domain. The integration of the digital yuan into the payment systems of Yiwu represents a significant step in this direction, showcasing the city’s commitment to embracing digital currency in both physical and online commerce.