Digital Yuan Marks Its First Use in Oil Transaction: A Landmark Step Towards De-dollarization
Summary:
The digital yuan was used for the first time to settle an oil deal with the Shanghai Petroleum and Natural Gas Exchange (SHPGX), marking a significant advancement for the currency. PetroChina International purchased 1 million barrels of crude oil on October 19. The yuan was also used earlier this year in two liquified natural gas (LNG) deals, demonstrating its growing role in international commerce. This development contributes to a wider trend towards de-dollarization in global markets.
In a groundbreaking event, the digital yuan was utilized for the first time in settling an oil deal, as confirmed by the Shanghai Petroleum and Natural Gas Exchange (SHPGX). PetroChina International made a purchase of 1 million barrels of crude oil on October 19, resulting from an initiative by the Shanghai Municipal Party Committee and Municipal Government to incorporate the Chinese central bank digital currency (CBDC), also known as the e-CNY, into international commerce.
A significant advancement for the digital yuan, it was noted by the China Daily, under state-control. However, information relating to the seller and the transaction price remains undisclosed. To put it into perspective, the cost of the “OPEC basket” of oil sourced from 13 manufacturers was $95.72 per barrel on Oct. 19.
This crude oil agreement also signifies an important progression in the use of yuan in the international market, pushing towards de-dollarization globally. The yuan saw an increase of 35% in cross-border settlements in the first three quarters of 2023, touching $1.39 trillion, reported by China Daily.
In March, the yuan was initially utilized to procure liquified natural gas (LNG) on the SHPGX platform when France's TotalEnergies agreed to sell LNG to the China National Offshore Oil Corporation (CNOOC). The second LNG deal involving the yuan happened last week between CNOOC and French Engie. These transactions did not incorporate the digital yuan.
In related news, on the same day, the First Abu Dhabi Bank declared that they have formalized an agreement involving digital currency with the Bank of China, a state-owned commercial bank. This agreement took place during the third Belt & Road Forum for International Corporation, which concluded just a day prior. Both China and the United Arab Emirates, including Abu Dhabi, contribute to the mBridge platform to facilitate cross-border transactions with CBDC. It is planned that next year, mBridge will be officially launched as a minimum viable product. Earlier in August, a deal for settling oil transactions in rupees was signed by Abu Dhabi and India.
Published At
10/23/2023 5:50:49 PM
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