The digital yuan transaction will be carried out through PetroChina International, the Chinese oil and gas company, a subsidiary of the state-owned China National Petroleum Corporation.
China's CBDC currency, the digital yuan, will be used for the first time to settle an international crude oil transaction of 1 million barrels.
Local media reported that the transaction will be conducted through PetroChina International Ltd. via the Shanghai Oil and Gas Trading Center platform.
With this transaction, the authorities seek to promote the use and adoption of the digital yuan in cross-border payments and international trade.
China's central bank digital currency (CBDC), also known as e-CNY, was officially launched during the 2022 Beijing Winter Games after several years of development and trial deployments.
Expanding digital yuan use cases to cross-border payments
The Bank of China's goal with the development of the digital yuan is to provide a faster, more stable and more efficient way to make payments, and while the digital currency has so far been implemented mostly in retail commerce and in the daily lives of citizens, the government wants to expand its use to the overseas market.
According to the Shanghai Securities News, the Shanghai Oil and Gas Trade Center has been one of the first entities to respond to the municipal government's call to actively promote the Incorporating the digital yuan into cross-border payments and in international oil trade transactions.
In March, the Shanghai Oil and Gas Trading Centre platform settled a liquefied natural gas transaction using the digital yuan. This transaction was between the state-owned oil company China National Offshore Oil Corporation and the French-based petrochemical group Total Energies.
China signs cooperation agreement with UAE
In addition to integrating the digital yuan into cross-border crude oil transactions, the Bank of China is also promoting its use in other areas of international trade.
Recently, Bank of China signed a cooperation agreement with First Abu Dhabi Bank, the largest bank in the United Arab Emirates, with the aim of strengthening collaboration between both regions through the CBDC digital currency.
The agreement was signed during the Belt and Road International Cooperation Summit held in Beijing this week.
mBrigde, a CBDC platform to connect the global economy
Both Bank of China and First Abu Dhabi Bank are part of the project mBridge, driven by the Bank for International Settlements (BIS), which is also focused on the use of CBDCs in cross-border payments.
Through CBDCs, central banks seek to solve the challenges currently facing payment systems, incorporating the advantages of blockchain technology to facilitate international payments at a lower cost, with greater speed, efficiency and transparency, and without the operational complexities that traditional systems entail.
mBrigde will connect banks’ digital currencies into a multi-CBDC platform to “enable cross-border payments to be instant, cheap and universally accessible with secure settlement,” the BIS said.
However, despite the advantages that CBDCs offer for wholesale use, at the retail level they pose several risks for their users, mainly in relation to financial privacy and censorship.
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