The internationalization of the yuan is going much faster than the figures from the Swift company suggest. Bitcoin is lying in wait.
The decline of the Swift network
Swift powers most international banking transactions. More than 11,000 financial institutions in over 200 countries and territories use its services.
It is the originator of the standardization that underlies international financial messaging. Private banks as well as central banks and financial markets use its messaging system to carry out their transactions.
The yuan is currently the fourth most used currency via the Swift (Society for Worldwide Interbank Financial Telecommunication) network. Its share has remained above 4% for the ninth consecutive month (4.75%). Compare this to 7% for the pound sterling, 22.50% for the euro and 47.80% for the US.
Its share is 3.32% for international payments alone. It is 12.80% for the euro (not including payments between countries in the euro zone) and 59.46% for the dollar.
In short, figures that are hardly impressive. Nevertheless, the Swift network is no longer a monopoly! The weaponization of the Swift network, the euro and the dollar against Russia has sent a chill through the BRICS. Many countries are returning to their own currencies while turning to new international payment systems.
The use of the yuan has been on the rise since Russia's disconnection from the Swift network. Sino-Russian trade (~$240 billion per year) is now almost exclusively in yuan or rubles.
The internationalization of the yuan is a reality. Let us recall that Xi Jinping publicly invited the Gulf countries to sell their oil in yuan via the Shanghai market. Knowing that Saudi Arabia, Iran and the United Arab Emirates have just joined the BRICS…
The continued decline in China's dollar reserves is a sure sign:
The Chinese equivalent of the Swift network
The transaction volume of China's cross-border payment system CIPS was 123 trillion yuan in 2023 ($17 trillion). Up 27% year-on-year.
This figure is expected to double this year, equivalent to $34 trillion. Compare this with the 150,000 billion exchanged via the Swift network.
The CIPS system now has 150 direct participants and 1,401 indirect participants. They are distributed in 117 countries and regions and can cover up to 184 countries and regions via more than 4,700 banks.
In short, the yuan's share of global trade is much higher than 4.75%. It is actually much closer to 20%. Not surprising when you consider that China's share of global trade is around 17%. Not to mention that China's GDP exceeds that of the United States (at purchasing power parity).
CIPS is gaining ground thanks to bilateral currency swaps. Forty-four countries have benefited from it for an amount of more than 500 billion dollars. So much so that more than 53% Chinese trade is now conducted in yuan. The dollar's share has fallen to 43%, down from 83% in 2010.
Even the IMF recently found that the use of the yuan in cross-border payments increased from 0% in 2014 to 20% in 2021 (out of a sample of 125 countries). A quarter of these countries predominantly use the yuan to trade with China.
What about bitcoin?
There is no sign that the Chinese government is turning its back on bitcoin. That said, Hong Kong Bitcoin ETFs have appeared. That bodes well.
Its great Russian ally is moving faster. The Duma and the Russian central bank have just authorized two platforms that will allow companies to carry out cross-border transactions in bitcoin. The framework remains “experimental”, but we can bet that the success will be resounding.
This service will initially be limited to large exporting and importing companies. By the way, several media outlets have falsely reported on stablecoins backed by the ruble as well as the yuan. It also does not seem that this experimental framework concerns CBDCs.
Initially frightened, governments realize that bitcoin is not a threat and that the world has never gone back after a technological breakthrough. Bitcoin is a universal payment network at the same time as a currency existing in absolutely finite quantities, two-in-one. There will be no going back.
Even the United States is realizing that it will sooner or later become the international reserve currency par excellence. Donald Trump has already announced the creation of a strategic reserve of bitcoins in the event of re-election. We are potentially talking about a reserve of 1 million BTC!
Trump knows that the de-dollarization process is irreversible. The BRICS will not turn back. The world needs a stateless currency, uncensorable and offering no privileges to any nation in particular.
It is time for the United States to trade on a level playing field and for geopolitical tensions to end before it is too late. Don't miss our article on this subject: Russia pleads in New York for end of dollar monopoly.
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