An increasing number of Chinese banks are issuing loans in digital yuan, the central bank’s digital currency (CBDC), as enterprise funding options diversify.
According to Nanhai Net, the South China branch of the China Communications Bank recently successfully issued over $20 million in digital yuan fixed-asset loans to a local company. This marks the first instance of a city bank utilizing CBDC to issue loans.
Currently, numerous banks across China are eager to employ CBDC, along with its smart contract functionalities, in the corporate finance sector. They believe that smart contracts and digital legal tender aid financial institutions in tracking money throughout all stages of the lending process.
Financial providers claim that loan recipients also benefit from using CBDC in lending transactions, as it speeds up transactions and allows companies to receive their funds in “real-time.”
However, according to many experts, banks might be the biggest winners in the issuance of enterprise digital yuan loans. They can accurately “monitor the money flow” and, notably, CBDC loans have fewer risks of being “misappropriated.” This allows banks to spend less on “money flow tracking” for the companies they lend to.
As per the findings, the China Communications Bank operates in commercial finance—securities and was established in 1908 as one of China’s earliest banks to participate in CBDC trials. Presently, the institution is collaborating with various parties to develop scenarios for e-CNY applications and new integrated financial services.
The bank’s leadership has stated they have plans to “enhance efforts to apply and promote digital yuan” to “provide customers with safer, more convenient, and cost-effective financial services.”