Deputy Governor of the People's Bank of China: Exploring new cross-border models for the digital renminbi to accelerate internationalization.

Lu Lei, Deputy Governor of the People's Bank of China, stated at the Hong Kong FinTech Week Startup Festival that the Central Bank of China attaches great importance to cross-border payment cooperation with Hong Kong and will explore new solutions for cross-border payments using the digital renminbi. In the future, it will promote multilateral Central Bank digital currency bridge cooperation and explore new paradigms for cross-border payments; relying on the digital renminbi cross-border payment platform to provide Chinese solutions for Central Bank digital currency cross-border payment cooperation; and build a dual platform of Blockchain and digital assets to activate a new engine for the value internet.

China's Central Bank Promotes Three Major Cross-Border Payment Innovations

Lu Lei, in his speech at the Hong Kong FinTech Week Startup Festival, stated that the Central Bank of China will continue to expand the Renminbi Cross-Border Payment System (CIPS) business in Hong Kong. In recent years, the system has gradually increased the bond connect northbound and southbound capital settlement functions, and has launched Hong Kong dollar payment clearing services. As of the end of September, there are a total of 11 direct participants and 120 indirect participants in Hong Kong, providing international trade investment settlement services. These figures indicate that the penetration rate of CIPS in Hong Kong is rapidly increasing, and it has become an important bridge between the Hong Kong dollar and the Renminbi.

11 direct participants are usually large banks that are directly connected to the CIPS system and enjoy the lowest transaction costs and the fastest settlement speeds. 120 indirect participants access CIPS through direct participants, and this layered structure ensures the scalability of the system. The steady growth in the number of participating institutions within just a few months from September to October shows that the Hong Kong financial community's acceptance of the Renminbi cross-border payment infrastructure is increasing.

Lu Lei stated that the Central Bank of China is actively promoting the interconnection and cooperation of rapid payment systems between the two regions. The Cross-border Payment Channel successfully went live in June this year, providing online rapid bilateral local currency and bilateral RMB remittance services for residents of both regions. Currently, the system operates smoothly, business processing is normal, and the public response is positive. The Cross-border Payment Channel connects “Faster Payment System” (Hong Kong) and the “Digital RMB” system, allowing Hong Kong residents to transfer funds directly to relatives and friends in the mainland without going through the complicated processes of traditional banks.

Lu Lei pointed out that the Central Bank of China is deepening the interoperability of cross-border QR code payments and has recently organized the establishment of a unified gateway for cross-border QR codes, serving as a unified interface for conducting cross-border QR code payment cooperation. This further facilitates cross-border QR code payment collaboration between institutions in the two regions. This means that in the future, Hong Kong users may be able to use their familiar payment applications to scan and pay in the mainland, while mainland users can also seamlessly use WeChat Pay or Alipay in Hong Kong.

Three Major Solutions for Digital Renminbi Cross-Border Payment

Lu Lei stated that in the future, they will use the digital RMB to explore new solutions for cross-border payments, including three core directions. The first direction is to promote the cooperation of the multilateral Central Bank Digital Currency Bridge and explore new paradigms for cross-border payments. The multilateral Central Bank Digital Currency Bridge (mBridge) is a project jointly developed by the People's Bank of China, Hong Kong Monetary Authority, Bank of Thailand, Central Bank of the UAE, and the Bank for International Settlements, aiming to achieve instant cross-border payments and settlements using Central Bank Digital Currency.

The core advantage of mBridge lies in eliminating multiple intermediaries in traditional cross-border payments. The traditional SWIFT system requires multiple intermediaries such as correspondent banks and clearing banks, with each step adding cost and time. mBridge allows the central banks of participating countries to conduct real-time settlement of digital currencies directly, theoretically reducing cross-border payment times from days to seconds. For the internationalization of the digital yuan, mBridge is one of the most important infrastructures.

The second direction is to rely on the digital renminbi cross-border payment platform to provide a Chinese solution for Central Bank digital currency cross-border payment cooperation. This statement indicates that the People's Bank of China not only hopes to use CBDC for cross-border payments but also wishes to export its technology and experience to other countries. The technical architecture, dual-layer operating system, and controllable anonymity design of the digital renminbi may serve as a reference model for other developing countries to develop their own CBDCs.

The third direction is to build a dual platform of Blockchain and digital assets, activating a new engine for the value Internet. This expression first clearly proposes the dual platform concept of “Blockchain and digital assets.” The blockchain platform may refer to the underlying technological infrastructure that supports the operation of the digital yuan and other CBDCs, while the digital asset platform may encompass a wide range of digital asset categories such as tokenized securities and tokenized commodities.

Three Major Solutions for Cross-Border Payment with Digital Currency

Multi-Central Bank Digital Currency Bridge (mBridge): In collaboration with the Central Banks of Hong Kong, Thailand, and the UAE, to achieve real-time cross-border settlement.

Digital Renminbi Cross-Border Payment Platform: Export China's CBDC technical solutions as a reference for other countries.

Blockchain and Digital Asset Dual Platform: Building a comprehensive infrastructure covering CBDC and tokenized assets.

These three directions together constitute a complete strategic picture for the internationalization of the digital renminbi, advancing layer by layer from technical standards, cooperation networks to ecosystem construction.

Hong Kong FinTech 2030 Vision and Regulatory Openness

The Hong Kong Monetary Authority (HKMA) Chief Executive Eddie Yue, in his opening speech at the FinTech Week, elaborated on the “FinTech 2030” vision, aiming to develop Hong Kong into a robust, resilient, and forward-looking international financial technology hub, focusing on four key areas that encompass over 40 specific projects. Among them, it was mentioned that the HKMA will also promote financial tokenization and foster a thriving tokenized ecosystem.

The Monetary Authority will take the lead in demonstrating asset tokenization, such as regularizing the issuance of tokenized government bonds, while also exploring the feasibility of tokenizing foreign exchange fund notes and bonds. The Monetary Authority is about to launch the Ensemble project pilot program to support real transactions and will continue to collaborate with industry stakeholders and other Central Banks to foster innovative tokenization use cases. These initiatives show that Hong Kong is actively embracing the digital asset revolution, and the application of the digital yuan in Hong Kong will become an important component of this ecosystem.

On the same day, the Hong Kong Securities and Futures Commission released important regulatory open policies. First, it allows platform operators to sell virtual assets that do not have a 12-month track record to professional investors and Hong Kong-licensed stablecoins. This means that newly launched virtual assets no longer need to wait for a one-year observation period to be listed on licensed platforms, significantly accelerating the speed at which innovative projects enter the market.

Secondly, the Hong Kong Securities and Futures Commission issued a circular regarding the sharing of liquidity among virtual asset trading platforms, allowing licensed virtual asset trading platform operators to integrate order books with qualified overseas platform operators to share liquidity, enabling cross-platform matching and trade execution. This regulatory openness allows Hong Kong's virtual asset trading platforms to integrate with global markets, significantly enhancing liquidity depth. Platforms must adopt DVP (Delivery Versus Payment), intraday settlement, and monitoring of unsettled transaction limits, and establish reserve funds and insurance compensation arrangements in Hong Kong at least at the upper limit scale to cover settlement asset risks.

Potential Interaction between Digital Renminbi and Crypto Ecosystem

The People's Bank of China and Hong Kong regulators released these policies at the same time, indicating that coordination in the fields of financial technology and digital assets between the two regions is strengthening. The cross-border expansion of the digital renminbi and the openness of Hong Kong's virtual asset regulation may create interesting interactions. On one hand, the digital renminbi, as a sovereign digital currency, represents the official digital financial system; on the other hand, decentralized cryptocurrencies represented by Bitcoin and Ethereum embody grassroots innovative power.

Hong Kong, as an international financial center and a special administrative region of China, is trying to establish a bridge between these two systems. Allowing licensed platforms to issue new virtual assets and share global liquidity shows that Hong Kong hopes to become a node connecting the mainland of China with the global crypto market. At the same time, the deep application of the digital yuan in Hong Kong provides new tools for the financial integration between the mainland and Hong Kong.

This dual-track parallel strategy may serve as a reference model for other countries around the world. Embracing the official CBDC system while also allowing regulatory space for decentralized crypto assets, seeking balance and synergy between the two. In the long run, the digital renminbi may coexist with some compliant stablecoins or crypto assets in the Hong Kong market, forming a multi-layered digital financial ecosystem.