The Digital Yuan Used for Oil Transaction for the First Time
The Shanghai Petroleum and Natural Gas Exchange (SHPGX) has announced that the digital yuan, China’s central bank digital currency (CBDC), was used for the first time to settle an oil transaction. PetroChina International purchased 1 million barrels of crude on October 19. This move is in response to a call by the Shanghai Municipal Party Committee and Municipal Government to apply the digital yuan to international trade.
The specific details of the transaction, including the seller and price, were not disclosed. However, it marks a significant step forward for the digital yuan and its use in international markets. It also contributes to the global trend of de-dollarization. In fact, in the first three quarters of 2023, the use of the yuan in cross-border settlements increased by 35% year-on-year, reaching $1.39 trillion.
Expanding Use of Yuan in International Markets
This recent oil transaction is not the first time that yuan has been used on SHPGX. In March, French TotalEnergies sold liquified natural gas (LNG) to China National Offshore Oil Corporation (CNOOC) using yuan. Another LNG deal in yuan took place last week between CNOOC and French Engie.
While these previous transactions did not involve the digital yuan, they demonstrate an increasing acceptance of yuan as a means of payment in international trade. The use of yuan in cross-border settlements continues to grow steadily, indicating its expanding role in global commerce.
Hot Take: The Digital Yuan’s Milestone Achievement
The utilization of the digital yuan for an oil transaction represents a significant milestone for China’s CBDC. By applying it to international trade, China aims to strengthen its position in global markets and reduce reliance on the US dollar. This move aligns with the broader trend of de-dollarization, as more countries seek alternatives to the dominant global currency.
As the digital yuan gains traction in international trade, it has the potential to reshape the global financial landscape. Its successful use in settling an oil transaction demonstrates its viability as a digital currency for large-scale commercial activities. The future of digital currencies and their impact on traditional financial systems is evolving rapidly, and the digital yuan is positioned to play a prominent role in this transformative process.
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