Global Fintech Insights: Digital Yuan Hub, Japan’s DCJPY, Blockchain Triumphs, and Finland’s Instant Payment Revolution

Global Fintech Insights: Digital Yuan Hub, Japan’s DCJPY, Blockchain Triumphs, and Finland’s Instant Payment Revolution

Explore the cutting-edge developments in the world of digital currencies, from China’s groundbreaking digital yuan hub to the impending launch of Japan’s DCJPY. Discover how Finland is embracing the digital euro, and witness JPMorgan’s successful cross-border payments pilot with First Abu Dhabi Bank.

China Unveils Shenzhen Hub for Digital Yuan CBDC Innovation

China has launched an industrial park in Shenzhen aimed at fostering the development of the digital yuan ecosystem. 

This groundbreaking initiative, reported on Oct. 11 in Chinese media, marks the establishment of the first-ever park dedicated to the central bank digital currency (CBDC), also known as the e-CNY.

Situated in Shenzhen’s Luohu district, adjacent to Hong Kong, the industrial park is commencing its operations with nine initial residents. 

Reports indicate that the district government has introduced ten strategic initiatives to accelerate the growth of the digital yuan ecosystem. These initiatives encompass the advancement of payment solutions, smart contracts, hard wallets, and the promotion of the digital yuan.

In an effort to incentivise new residents, the government is offering compelling benefits, including up to three years of rent-free accommodation. 

Commercial banks that choose to establish a presence in the park can receive incentives of up to 20 million yuan ($2.7 million), while startups may be eligible for support of up to 50 million yuan ($6.9 million). 

The total government support allocated for this endeavour amounts to 100 million yuan ($13.7 million). Additionally, favourable loan terms are being extended to participants.

Notably, among the inaugural residents of the park are prominent entities such as Hengbao, Wuhan Tianyu Information, and Lakala Payment. Hengbao and Tianyu are engaged in the production of payment cards, among other endeavours, while Lakala Payment operates as a payment processor and collaborates with Visa.

China has implemented numerous strategies to stimulate the adoption of the digital yuan, which is currently in the pilot phase. 

This initiative spans 26 cities participating in the pilot program, and the central bank digital currency (CBDC) is already accepted by 5.6 million merchants—a number that is expected to steadily increase, thanks to government support and technological advancements.

Notably, the digital yuan app recently introduced a feature allowing tourists to link their Visa and Mastercard accounts, further enhancing its accessibility. Despite these efforts, the adoption rate is still perceived as sluggish, with 261 million digital yuan wallets created as of 2022.

Japan to launch its digital currency in 2024

In a significant development, the DCJPY, a digital currency backed by the Japanese yen, is set to launch in July 2024. This ambitious project is spearheaded by DeCurret Holdings, a digital currency and electronic payments firm, as detailed in their white paper released on October 12.

The DCJPY Network, outlined in the white paper, will comprise two key zones: the Financial Zone and the Business Zone. 

The former will facilitate banks in minting digital currency deposits on the blockchain, while the latter will be dedicated to conducting transactions. 

Additionally, the Business Zone will serve as a platform for the issuance of nonfungible tokens, security tokens, and governance tokens.

Aozora Bank, a commercial institution with 19 branches in Japan, is poised to become the principal issuer of DCJPY. 

The digital currency will be fully backed by Japanese yen deposits. 

In 2021, DeCurret reported the formation of a consortium consisting of 70 Japanese companies that will participate in the DCJPY Network. While the white paper doesn’t disclose specific participant names, DeCurret boasts the support of 35 shareholding companies, including prominent names such as Japan Post Bank, Mitsubishi, and Dentsu Group.

In related news, the Bank of Japan, in May 2023, disclosed the results of the second phase of its central bank digital currency experiment and is on track to make a final decision on issuing a “digital yen” by 2026. 

Simultaneously, Binance and Mitsubishi UFJ Trust and Banking Corporation are actively exploring the issuance of Japanese yen and other foreign currency-denominated stablecoins within the country.

First Abu Dhabi Bank Successfully Concludes Cross-Border Payments Testing on JPMorgan Onyx

In a significant milestone, First Abu Dhabi Bank (FAB) has wrapped up its cross-border payments testing on JPMorgan’s Onyx platform. This achievement follows a similar pilot conducted by Bank ABC in Bahrain. 

JPMorgan, known for its cutting-edge blockchain solutions, has also introduced its Tokenization Collateral Network on the Onyx platform.

The blockchain-based cross-border payments pilot project between JPMorgan’s Onyx Coin Systems and FAB was executed seamlessly, with response times meeting expectations, according to an official statement.

Notably, the FAB pilot concluded shortly after a successful test in Bahrain, where Bank ABC trialed the Onyx system and subsequently initiated a limited launch of services. 

JPMorgan’s permissioned distributed ledger, launched in 2020, has been gaining substantial traction in recent months. Tyrone Lobban, the Head of JPMorgan Onyx Digital Assets and Blockchain, disclosed that the platform currently processes a daily volume ranging from $1 billion to $2 billion.

Moreover, Onyx has expanded its reach beyond the Middle East, serving as a platform for euro-denominated payments in Europe since June. 

During the same period, it also facilitated interbank United States dollar settlements in India through collaboration with a consortium of six banks.

On October 11, JPMorgan’s groundbreaking Tokenization Collateral Network, operating on the Onyx blockchain, recorded its first public trade.

In this instance, money market fund shares were tokenised and securely deposited at Barclays Bank to support a derivatives exchange between JPMorgan and BlackRock.

The finance industry has witnessed increased interest in tokenisation, with Mastercard testing its Multi Token Network in June and Citigroup introducing Citi Token Services in September.

This collaborative effort, concluded in June, was initiated by the Monetary Authority of Singapore and the Bank for International Settlements. It focused on creating a liquidity pool of tokenised bonds and deposits for lending and borrowing purposes.

Finland Forges Ahead with Instant Payments and Digital Euro Initiatives

The Bank of Finland (BOF) is taking active steps to foster innovative payment solutions. 

BOF, under the guidance of Tuomas Välimäki, a BOF board member and a member of the Governing Council of the European Central Bank (ECB), has announced its role in coordinating the development of a Finnish instant payment system aligned with European standards

Välimäki emphasized the significance of the digital euro, referring to it as the most prominent project within the European payment sector. He highlighted the potential of a digital euro, stating, “The possible introduction of a digital euro would give consumers the option of paying with central bank money wherever electronic payment is accepted.”

The Bank of Finland, in collaboration with the European Payments Council, is actively engaged in crafting this Finnish instant payment solution. 

It’s worth noting that this solution will be based on credit transfers, eliminating the reliance on traditional payment card infrastructure.

In February 2023, a Finnish company named Membrane Finance took a significant step by launching a fully reserved stablecoin backed by the euro, known as EUROe. 

Membrane Finance CEO Juha Viitala expressed optimism about EUROe’s potential to encourage more Europeans to explore decentralised finance (DeFi) applications and enhance their financial well-being.

On October 18, the governing council of the European Central Bank (ECB) initiated the “preparation phase” for the digital euro project, a two-year period aimed at finalising regulations for the digital currency and selecting potential issuers. 

Finland’s proactive stance in embracing instant payments and exploring the digital euro reflects the country’s commitment to staying at the forefront of modern payment solutions.