China digital currency: will Western sanctions against Russia over Ukraine boost e-yuan?
- With the Swift system being used in sanctions against Russia, China’s digital yuan payment system could be a replacement, say Chinese researchers
- The as yet unlaunched point-to-point digital payment system should reduce the need for cross-border financial messaging between banks
Western sanctions imposed against Russia following the invasion of Ukraine, including exclusion from the Swift financial messaging system, could offer new development opportunities for China’s digital currency and its home-grown yuan cross-border payment system, analysts said.
“We believe that it is necessary and urgent to vigorously promote yuan internationalisation, especially the development of the CIPS system and the digital yuan,” Citic Securities analyst Ming Ming wrote in a research note on Tuesday.
While the market draws attention to China’s own yuan payment and settlement system, which has 75 direct participants including Citibank, HSBC and Deutsche Bank, and 1,205 indirect participants, any entity dealing with Russia-linked businesses could be subject to sanctions.
One distinctive characteristic of digital yuan is that payment and settlement happen concurrently
“One distinctive characteristic of digital yuan is that payment and settlement happen concurrently. This will help reduce reliance on bank accounts and bypass financial intermediaries in some scenarios,” Ming said.