Last week saw significant advancements in CBDC usage and the shift away from the U.S. dollar when a 1-million-barrel oil transaction took place on the Shanghai Petroleum and Natural Gas Exchange. The landmark event marked the first time the digital yuan was employed to settle an oil deal. On October 19, PetroChina International made the purchase, acting on encouragement from the Shanghai government to incorporate China’s digital currency in global trade. This move was hailed by China Daily as a significant progression for the e-CNY.
While the seller and transaction rate remain undisclosed, for reference, the cost of oil from the consortium of 13 producers in OPEC stood at $95.72 per barrel on the same day.
This crude transaction is emblematic of the rising prominence of the yuan in the global market and the broader trend of moving away from dollar dominance. In the initial three quarters of 2023, cross-border settlements in yuan surged by 35% from the previous year, hitting $1.39 trillion, as per China Daily’s data. Notably, earlier this year, physical yuan was used for liquified natural gas deals on the same exchange, but these did not involve the digital version.
In related news, on October 19, the First Abu Dhabi Bank entered a digital currency agreement with the Bank of China during the third Belt and Road Forum for International Corporation. Both China and the UAE, with Abu Dhabi as a member, are engaged in the mBridge initiative, which facilitates cross-border operations using CBDC. The platform is slated for a preliminary launch next year.