Singapore-headquartered DBS has launched a solution for merchants in mainland China to receive payments in e-CNY, following the successful completion of a transaction using the market’s central bank digital currency (CBDC), for a Shenzhenbased catering client.

The move makes DBS one of the first foreign banks to launch an e-CNY solution in China and allows local businesses to meet growing consumer usage of the CBDC, the announcement explained.

“We anticipate interest especially from businesses and government organisations that serve consumers and seek to broaden their modes of digital payment collection,” Singapore based Lim Soon Chong, group head of Global Transaction Services at DBS Bank.

However, overall market demand for alternative, digital forms of money, such as e-CNY, will ultimately depend on central bank policy, industry wide adoption, as well as the value proposition to end users, Lim explained.

China’s e-CNY project was launched in April 2020 and is among the most advanced CBDC projects in the region. As of December 2022, over 13.6 billion worth of e-CNY was in circulation, and currently the CBDC is accepted across 26 cities and 17 provinces in China, according to China’s Ministry of Commerce.

“We’ve observed that e-CNY usage in China has grown steadily since its pilot and adoption is expected to grow further as the programme gradually expands to move regions,” Lim said, adding that by offering e-CNY transaction capabilities, corporates in China position themselves for a “digital future”.

The release noted that DBS’ new solution also supports financial market innovation in China. A next step will be exploring CDBC use for international payments, Lim suggested.

“There is increasing interest from central banks in the region, and in fact globally, to embark on CBDC projects,” he said, citing Hong Kong’s e-HKD project, India’s digital rupee initiative, and Indonesia’s Project Garuda, as examples.

“There are also a number of CBDC projects that focus on cross-border and cross-currency use cases, such as Project Dunbar and Project mBridge, which are led by the Bank for International Settlements (BIS) where DBS has actively participated.”

He added it was too early to say whether CBDCs would take off as a mainstream mode of payment for businesses given the infancy of these projects.

“That said, we do see CBDCs being one promising digital solution that can enable instant and frictionless 24/7 payments for customers and businesses,” Lim concluded.

Other initiatives by DBS in the digital payments space include its involvement in blockchain-based multi-currency payments platform, Partior, and its precursor, Project Ubin, which was led by the Monetary Authority of Singapore (MAS).

The bank is also part of MAS’ Project Orchid to develop the infrastructure for Singapore’s own CBDC, and its Project Guardian, to study the application of decentralized finance in foreign exchange (FX) and government securities transaction settlements.

Corporate Treasurer