The yuan has outperformed the yen in international transactions. Competition is getting thicker for bitcoin.
SWIFT vs. CIPS
Figures released Wednesday by the Swift network show that the yuan’s share of global payments was 4.6% in November, compared to 3.6% the previous month. The yuan has become the fourth most used currency for international payments, behind the pound sterling, the euro and the dollar.
However, these figures are far from the mark. The SWIFT network is no longer a monopoly since the launch of the Chinese CIPS system. The yuan’s share of international transactions is actually closer to 20%.
Indeed, CIPS is on the verge of reaching a volume of 150,000 billion yuan for 2023 (+50% compared to 2022). Or approximately 21,000 billion dollars, to compare with the 150,000 billion dollars facilitated by the SWIFT network.
“The acceleration of yuan payments partly reflects the geopolitical context”said Mansoor Mohi-uddin, chief economist at the Bank of Singapore at FT. “This situation and long-term trade trends are accelerating the adoption of the Chinese currency.”
The geopolitical context is indeed very tense. Washington and Brussels disconnected Russia from the SWIFT network shortly after the start of the conflict in Ukraine. Not to mention the freezing of 300 billion euros/dollars of foreign exchange reserves belonging to the Russian central bank.
Since then, many countries have indicated their intention to distance themselves from the greenback. This is also the primary condition for joining the BRICS club. Knowing that it will soon welcome two exporting powers which until now accepted exclusively the dollar: Saudi Arabia and the United Arab Emirates.
The internationalization of the yuan is therefore not exclusively linked to the Sino-Russian rapprochement. Carlos Casanova, senior Asia economist at UBP, told the FT: “Russia does not explain everything. We are also seeing an increase in yuan settlements in Asia and with other economies that rely heavily on Chinese demand.”
Yuan vs Dollar vs Bitcoin
This Wednesday, December 20, China carried out the very first cross-border settlement using a CBDC, also known as e-CNY, for gold. The Bank of China branch successfully transferred 100 million yuan from Hong Kong to the Shanghai Stock Exchange.
Little information has filtered about this test transaction probably carried out under the aegis of the Bank for International Settlements (BIS) and its system mBridge.
Buying gold in China using a CBDC sends a strong message to oil exporting nations. Let it be said, the yuan is convertible into gold…
By the way, Russian President Vladimir Putin recently made mention of blockchain and CBDCs:
“When it comes to international transactions, we are increasingly converting to advanced solutions, including those involving blockchain and CBDCs. »
Since CBDCs do not use blockchain technology, this was probably a nod to bitcoin, the currency of enemies…
Bitcoin is a stateless and uncensorable currency and international payment system. It is the perfect solution to replace the dollar.
There is indeed little chance that the United States will accept the yuan. Bitcoin would then allow the two nations to play on equal terms, without anyone unfairly benefiting from an exorbitant privilege.
The final adoption of bitcoin via the launch of an ETF on Wall Street should allow this idea to continue on its merry way.
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