Prospects for digital currency in cross-border payments: The China experience

Aim. The article aims to assess the prospects for digital currencies in cross-border payments based on the experience of introducing the digital yuan in China. Objectives. The work seeks to study the features of digital currencies in comparison with cryptocurrencies, to identify the aspects of practical implementation of introducing the digital yuan in China, to summarize the factors that necessitated this implementation, as well as the conditions for generating the basis for using the digital yuan in cross-border payments. Methods. The study employed synthesis, analysis, generalization, and a formal logical approach, as well as general scientific methods for studying economic phenomena and processes. We performed an analysis of the development, implementation and probable consequences of the technological solution for the implementation of electronic payments in digital currency. In addition, priority fields for using the digital yuan in cross-border payments were identified. Results. As China has been the undoubted leader for many years in the global e-commerce market, which is the most probable field for such application, the national payment system of China is the study subject in the article, which demonstrates advanced and successful experience on the Earth among relatively large countries in introducing a national digital currency into circulation. The study results demonstrate that the widespread application of digital currency in the national credit and monetary system not only increases the efficiency of payments while reducing transaction costs of market participants and improving the financial and economic performance of firms. It also creates a wide range of opportunities for using central bank digital currencies in international payments. These opportunities seem especially promising in cross-border payments. Conclusions. The options for using the digital yuan are gradually expanding, including in cross-border payments. There is also a gradual quantitative and geographical expansion. The use of the digital yuan in cross-border payments will enable to avoid settlements in dollars, which may be a step towards a significant transformation of the global currency system.