Chinese digital yuan CBDC used for first time to settle cross-border oil deal

The digital yuan has been used for the first time to settle an oil transaction, the Shanghai Petroleum and Natural Gas Exchange (SHPGX) announced. PetroChina International bought 1 million barrels of crude on Oct. 19. 

The transaction was a response to a call by the Shanghai Municipal Party Committee and Municipal Government to apply the Chinese central bank digital currency (CBDC), also referred to as the e-CNY, to international trade, the exchange said. It is “another major step forward” for the digital yuan, according to the state-controlled China Daily.

The seller and the price in the transaction were not disclosed. For comparison, the price of the “OPEC basket” of oil from 13 producers was $95.72 per barrel on Oct. 19.

The crude oil deal also marks an overall major step in the use of the yuan on the international market and in the global movement toward de-dollarization. In the first three quarters of 2023, the use of the yuan in cross-border settlements was up 35% year-on-year, reaching $1.39 trillion, China Daily reported. 

The yuan was first used for a liquified natural gas (LNG) purchase on SHPGX in March when the French TotalEnergies agreed to sell LNG to the China National Offshore Oil Corporation (CNOOC). The second LNG deal in yuan occurred last week between CNOOC and French Engie. Those transactions did not involve the digital yuan.

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Also on Oct. 19, First Abu Dhabi Bank announced that it had signed an agreement on digital currency with the Bank of China, the state-owned commercial bank, at the third Belt and Road Forum for International Corporation, which had ended a day before. China and the United Arab Emirates, of which Abu Dhabi is part, are participants in the mBridge platform to support cross-border transactions with CBDC. MBridge intends to launch as a minimum viable product next year.

Abu Dhabi signed an agreement with India in August to settle oil deals in rupees.

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