The central bank, pushed to the brink, accelerates the digital yuan development

In the past month, the central bank has been rolling out a series of policies regarding digital renminbi. What exactly is happening behind the scenes?

External Expansion: Accelerating the Internationalization of the Renminbi

After an important meeting on November 28, the People’s Bank of China (PBOC) immediately issued an announcement on December 11, authorizing DBS Bank to serve as the renminbi clearing bank in Singapore. This move is highly significant—Singapore, as an Asian financial hub, and DBS Bank, the region’s largest commercial bank, obtaining renminbi clearing bank qualification, further advances the internationalization process of the renminbi.

Currently, the PBOC has authorized 32 renminbi clearing banks across 29 countries and regions. This series of actions indicates that expanding the influence of the renminbi abroad has become a core priority.

Internal Policy Measures: Comprehensive Upgrades in System Design

On December 12, the Ministry of Commerce, together with the PBOC and the Financial Regulatory Authority, issued a joint notice aimed at strengthening cooperation between commerce and finance to further boost consumption. Notably, all participating departments are the main units involved in the November 28 meeting, demonstrating strong policy coordination and enforcement.

The latest major news is that starting next year, digital renminbi will begin accruing interest. This reform has been rapidly pushed forward within just two weeks, reflecting the central bank’s firm determination.

The Truth: Forced Choice Under the Shock of Stablecoins

Why have these policies been introduced intensively in such a short period? The fundamental reason lies in the rapid expansion of cryptocurrencies, especially stablecoins. The rise of international stablecoins poses a substantial threat to the traditional financial system, prompting the central bank to take action.

Rather than passively responding, it’s better to take proactive measures. The PBOC has chosen to develop its own digital renminbi— a CBDC stablecoin led by the central bank. This solution leverages blockchain technology and is backed by the central bank, giving it a natural credit advantage over private stablecoins.

Dual Circulation Strategy: Building a Digital Renminbi Ecosystem

The central bank’s new approach revolves around the “internal circulation + external circulation” strategy:

• Externally, expanding the process and scope of renminbi internationalization to enhance its global competitiveness
• Internally, developing more application scenarios to increase the usage and settlement volume of digital renminbi

This strategy is unattainable by stablecoins alone; it combines national credit with technological innovation.

Smart Contracts: A Risk-Reducing Tool

The smart contract functionality of the digital renminbi is its core advantage. This technology can effectively address issues of fund flow regulation, preventing arbitrage and misappropriation.

For example, in consumer subsidies, current government subsidy policies still have loopholes, with some individuals seeking arbitrage opportunities at various points in the payment chain. Using digital renminbi’s smart contract mechanisms for fund management can realize “on-demand release”—funds are released to merchants proportionally to the subsidy amount. If there is a breach or fraud, the funds are immediately frozen, preventing middlemen from misappropriating them.

In practical applications within the education and training sector: parents worry about institutions collapsing and being unable to get refunds. But if smart contracts are used, funds can be released according to course progress, and even if the institution runs away, it cannot take the funds. The same logic applies to leasing, procurement, and other high-leverage financial fields.

Bank Innovation Practices

Major banks have developed specialized applications based on the digital renminbi:

• Bank of Communications launched a smart credit contract wallet for procurement categories
• Agricultural Bank of China developed a fund supervision smart contract for shared leasing enterprises

These applications are similar to decentralized applications on public blockchains but are strictly controlled, with only authorized institutions able to participate in development.

Outlook: From Possibility to Reality

The use cases for digital renminbi are continuously expanding, and its future adoption may rival that of QR code payments in the early days.

While competing with international giants in the stablecoin arena offers limited benefits, developing a proprietary digital renminbi system can achieve dual internal and external goals—strengthening the international status of the renminbi while developing rich domestic application scenarios. This strategic advantage is something no private stablecoin can match.