Domestic observers say that recent moves to include municipal and commercial banks in digital renminbi trials mark a major expansion of the scheme, given that it will involve more than one hundred “non-operator” financial institutions in urban areas alone.
City Commercial Banks Clearing Company (城银清算) and the Rural Credit Bank Funds Clearing Centre (农银清算) – the two key organisations for settlement by municipal commercial and rural commercial banks, both announced the launch of “one point integration” (一点接入) digital renminbi systems on 13 August.
The move marks the start of the inclusion of a greater number of smaller lenders such as municipal commercial banks, rural commercial banks and rural village financial institutions into digital renminbi trials, and their integration with the “Digital Renminbi Interconnection Platform” (数字人民币互联互通平台).
City Commercial Banks said that as of 12 August a total of 24 municipal commercial banks had integrated with the platform, with another 94 banks set to sign up subsequently.
“More and more banking institutions are becoming involved, and this is a major event for the steady advance of digital renminbi trials,” said Che Ning (车宁), deputy-chair of the Politics and Sustainable Development Research Centre at the China University of Political Science and Law to Securities Daily.
“Small and medium-sized banks are one-layer closer to the market, and have strong regional advantages when it comes to unique local consumer environments and financial services.
“They can play an important role in expanding the scope of the digital renminbi, and deeper integration with local economies and financial activities.”
The inclusion of a greater number of smaller banks also marks a major expansion of the trials to drive cooperation between “non-operator” and “operator institutions” for the digital renminbi under the currency’s two-tier system. These operator institutions include the big six state-owned banks, who are responsible for direct exchange of the digital renminbi with the Chinese central bank.
“At present, non-operator institutions that want to participate in digital renminbi trials have two main methods,” said Liu Bin (刘斌), chair of the Research Office of the China (Shanghai) Free Trade Zone Research Institution.
“The first is by means of integration with designated clearing bodies, and the second is by means of cooperation and integration with designated operator institutions.
“Given the high demands in terms of technical infrastructure and systems management when it comes to the process of circulating the digital renminbi, it’s more rational for the small and medium-sized banks to engage in cooperation with designated operator banking institutions or related institutions.
“Not only is the feasibility level higher, it is also of benefit to achieving secure and efficient usage of the digital renminbi.”
Bank of Shanghai recently announced that it had chosen Bank of Communications to serve as its “operator institution” for digital renminbi wallets, while Bank of Changsha said it would cooperate with ICBC, and Bank of Xi’an said that it would work with Agricultural Bank of China as its “exchange institution.”