China and SWIFT Partner to Take Digital Currency Global
Voice of America
13 Feb 2021, 07:05 GMT+10
TAIPEI – China’s central bank has partnered with SWIFT, the European-based global system for financial messaging and cross-border payments, to set up a joint venture – a move that observers say shows China’s ambitions to take the digital version of its currency, the yuan, global.
Some analysts VOA spoke to add that the development may further trigger a “hot” war between the official digital currency, often called the renminbi, and the U.S. dollar, although many agree that China’s currency still has a long way to go before it would rival its U.S. counterpart.
The new entity, Finance Gateway Information Services Co., was established in Beijing in mid-January with registered capital of $12 million, and its business scope includes information system integration, data processing and tech consultancy, according to China’s National Enterprise Credit Information Public System.
SWIFT, the Society for Worldwide Interbank Financial Telecommunication, owns a 55% stake in the venture, while the remaining 45% is co-owned by four institutions under China’s central bank, including the China National Clearing Center, Cross-Border Interbank Payment System (CIPS) and its digital currency research institute.
FILE – Chinese staffers adjust U.S. and Chinese flags before a session of negotiations between U.S. and Chinese trade representatives, at the Diaoyutai State Guesthouse, in Beijing, China, Feb. 14, 2019.
Abishur Prakash of the Center for Innovating the Future in Toronto, Canada, said the partnership highlights two geopolitical implications.
“The first aspect to this is China laying down the foundation for its digital yuan to go global. And the second implication of this has to do with … obviously, USD is the main focus. But it’s also about the U.S. losing control of systems it created,” Prakash told VOA earlier this week.
“In the middle of massive geo-political competition between the U.S. and China, China is plugging into SWIFT more deeply. It is quite a powerful message that the control the U.S. once had in these systems is no longer the same,” he added.
Founded in 1973, the Belgium-based SWIFT is dominated by the U.S. dollar. And its platforms, which connect 11,000 financial institutions worldwide, enable the U.S. to enforce sanctions in the service of its foreign policy.
The analyst said China likely will next make use of tech services and online platforms, owned by Chinese companies, to expand global uses of its digital yuan.
For example, he said 550 million global users of China’s ride-hailing giant Didi Chuxing, which is testing the digital yuan on its platforms, may soon opt to pay for yuan-denominated taxifares – transactions that will be settled at the touch of a finger with SWIFT’s help.