China’s Ex-Digital Yuan Chief Took $8M in Crypto Bribes, Investigation Reveals

Quick overview

China-led digital currency platform mBridge has successfully processed a whopping $55.5 billion in cross-border payments – a clear sign that non-dollar settlement systems are taking off. Since kicking off its 2022 pilot, the platform has handled more than 4,000 transactions, a pretty astonishing 2,500 fold increase in just under two years, according to the Atlantic Council.

mBridge is currently being put through its paces by central banks in China, Hong Kong, Thailand, the UAE, and Saudi Arabia. Not surprisingly, China’s own e-CNY accounts for all but a tiny fraction – around 5 per cent – of the transaction volume.

Meanwhile, the growth of mBridge parallels China’s domestic CBDC expansion – the People’s Bank of China is reporting an impressive 3.4 billion e-CNY transactions that total a staggering 16.7 trillion yuan ($2.4 trillion), which is an 800% increase on last year’s numbers.

Key mBridge highlights:

• Over 4,000 cross border transactions now under the belt
• e-CNY is dominating with a whopping 95% of the total transaction volume
• The pilot countries are – China, Hong Kong, Thailand, UAE, and Saudi Arabia

China Is Turning Its Digital Yuan Into A Cash Earning Asset

The People’s Bank of China (PBOC) is rolling out a new framework that lets commercial banks pay interest on e-CNY wallet balances. This is expanding the money beyond its role as a payment system, and turning it into a sort of digital deposit currency, which will enable value storage, asset management, and international transactions. PBOC Deputy Governor Lu Lei described the digital yuan’s transition as a key milestone: “digital deposit currency”.

Analysts reckon that these developments will gradually advance the internationalisation of the yuan, and help build parallel settlement systems which could reduce our reliance on the US dollar without directly threatening it. This move is giving e-CNY a bigger role in cross border trade, savings, and payments, and is cementing its status as a key financial infrastructure component.

The benefits of interest-bearing e-CNY

• Makes it even more appealing to people to use digital yuan – because why not earn some interest on your savings?
• Means people can store some of their cash digitally alongside making transactions
• Will make it easier to pay – or be paid – in other countries

The BIS Has Given Up On mBridge Due To Sanctions Concerns

This year the Bank for International Settlements (BIS) pulled out of mBridge, describing it as more of a “graduation” rather than a formal withdrawal. The BIS General Manager Agustín Carstens made it clear that the platform can’t be used by sanctioned nations. There was speculation that mBridge might be used by BRICS countries to get around sanctions but it seems not.

The BIS has now shifted its focus to a different project – called Project Agorá – which is another CBDC initiative that involves the major Western central banks. They’re expanding testing on new digital settlement frameworks which is all very technical.

While the role of mBridge in all this is still up for debate, its rapid take off does highlight China’s long term strategy of enhancing payments between countries through digital infrastructure.

Key BIS update at a glance:

• Stepped away from mBridge to avoid getting caught up in sanctions risks
• Shifted focus to Project Agorá
• Is clearly keen to make sure they’re sticking to the rules on international regulations

ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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