China-led digital currency platform surges, challenging dollar-based payments

Transactions on a new China-led digital currency platform have surged to over $55 billion, a new report shows, the latest sign that efforts to build alternatives to dollar-dependent global payment systems are gaining traction.

Data crunched by the Washington-based Atlantic Council showed the prototype 'mBridge' platform, which is being tested by central banks in China, Hong Kong, Thailand, the United Arab Emirates and Saudi Arabia, had now processed more than 4,000 cross-border transactions.

The cumulative $55.5 billion value of those payments represents a roughly 2,500-fold increase since the project's early days of 2022, with the digital yuan estimated to now account for approximately 95% of the volume.

The e-CNY, as it is also known, remains the world's largest live central bank digital currency experiment.

Recent People’s Bank of China (PBOC) figures showed it had processed more than 3.4 billion transactions worth roughly 16.7 trillion yuan ($2.4 trillion), a more than 800% leap from 2023.

Chinese state media reported last month that the e-CNY will also start paying interest to those holding it in their digital bank accounts or wallets this year, a move widely seen as designed to boost usage.

"Taken together, these developments point to a gradual expansion of the yuan’s internationalization through digital infrastructure," the Atlantic Council's Alisha Chhangani said.

Rather than seeking to displace the dollar outright, China and its counterparts are building parallel settlement rails, Chhangani said, that reduce reliance on existing dollar-based systems.

"Project mBridge is unlikely to challenge dollar dominance directly, but it may incrementally erode it," she added.

The PBOC did not immediately respond to an out-of-business-hours request for comment on the figures.

The race is on

The progress of mBridge is being closely watch by policy makers globally.

It was originally overseen by central bank umbrella body, the Bank for International Settlements, but the Switzerland-headquartered institution unexpectedly quit the project in late 2024.

Although not a direct rival, the BIS now focuses efforts on another project with seven top - mostly Western - central banks including the New York Federal Reserve, Banque de France on behalf of the European Central Bank, the Bank of Japan, Swiss National Bank and Bank of England.

This week, the group, which is also working with over 40 major commercial banks, said it was stepping up testing.

Mbridge's development remains far ahead for now, however.

The United Arab Emirates' Ministry of Finance and the Dubai Department of Finance carried out the first government transaction using wholesale digital dirham on the platform in November.

The Atlantic Council's Chhangani said mBridge was likely to increasingly focus on trade settlements, particularly in energy and commodity-linked transactions, where China already plays a central commercial role.

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