Digital Renminbi Approved for Capital Market Applications


China is further expanding usage scenarios for its central bank digital currency (CDBC) – also known as the digital renminbi – to include investment in over-the-counter (OTC) wealth management products (WMPs) and capital market transactions.

On 19 May, state-owned brokerage China Galaxy Securities (中国银河证券) and Industrial and Commercial Bank of China (ICBC) held a joint press conference to announce the official launch of the “Securities Market Digital Renminbi Application Innovation” (券市场数字人民币应用场景创新) pilot project.

According to state-owned media reports, the move marks the first time that a securities brokerage in China has obtained approval from the China Securities Regulatory Commission (CSRC) to use the digital renminbi for investment in OTC WMPs.

In November 2021, CSRC’s Beijing office and the Beijing Municipal Financial Supervision Bureau unveiled a list of the first batch of 16 projects to be included in Beijing’s capital market fintech innovation trials. The pilot project submitted by Galaxy Securities and ICBC was the only project to involve the application of the digital renminbi to capital market transactions.

The pilot project encompasses a trio of applications developed by Galaxy Securities, including “Digital Renminbi Purchase of Paid Financial Services” (数字人民币购买有偿金融服务), “Digital Renminbi Purchase of Offshore Financial Products under a Three-party Depository System” (三方存管下数字人民币投资购买境外金融产品) and “Digital Renminbi Wealth Management” (数字财富管理下数字人民币).

Luo Liming (罗黎明), vice-president of Galaxy Securities, said the innovations would provides a raft of advantages to securities investors including:

  • The ability to place orders on 24-7 basis.
  • Raising the efficiency of capital flows thanks to the digital renminbi’s “payment is settlement” feature, permitting redemption and withdrawals one day in advance.
  • Shoring up the security of funds by means of smart contracts, traceability and the prevention of forgery and copying.

“The digital renminbi can effectively improve the efficiency of payment and settlement,” a Galaxy Securities executive said. “After redemption, funds will also be available for withdrawal one day in advance, which can effectively improve the customer investment experience and capital flow efficiency.

“With the optimization and upgrading of follow-up services, we expect the time for product redemption to be further shortened, so that clients can achieve more flexible allocation of funds.”

Wang Sheng (王晟), deputy party-secretary and president of Galaxy Securities, said the trials paved the way for the greater use of the digital renminbi in driving the development of China’s capital markets.

“Currently, our company is actively participating in a new phase of capital market fintech innovation trials, continuing to enrich the application scenarios for the digital renminbi and making the gradual creation of a sound digital renminbi capital market application ecosystem one of the key points for development,” he said.

“With the full implementation of the (share) registration system, China’s capital market has ushered in a new stage of development,” said Luo Liming.

“At present, the number of retail share investors in China has reached 200 million, while the number of fund investors has reached 200 million. According to figures from the China International Capital Corporation (CICC), the volume of financial assets that Chinese households can invest in will reach 229 trillion yuan by the end of 2021, and 486 trillion yuan by 2030.

“Due to its unique features, the use of the digital renminbi for the payment and transaction operations of securities companies can satisfy the need for safe, controllable and traceable capital flows, and ensure the timeliness and security of payment and transaction orders.

“The introduction of a new digital renminbi application scenario aims on the one hand to improve the capital efficiency and user experience of Galaxy’s existing clients, and on the other hand to attract young investors, especially by means of the digital currency.”

Looking to the future, Wang Sheng said that as a state-owned financial institution Galaxy Securities adhered to the mission of “serving the nation through finance” and “fulfilling the main responsibility of advancing national strategy.”

“The deep integration of business innovation and high-quality development will continue to contribute to fintech innovation on capital markets,” Wang said.

Chinese central bank drives expansion of digital renminbi trials

The People’s Bank of China (PBOC) – being China’s central bank has flagged the steady continuation in 2023 of trials schemes for the digital renminbi.

On 4 April at a meeting convened on work in relation to currency, gold, silver and security, PBOC officials said that digital renminbi research and development pilot projects should be “steadily promoted in 2023″ and “top-level design should continuously improve and innovative applications should be actively explored.”