Guangzhou accelerates digital RMB rollout—China's new blueprint for cross-border payments?
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Guangzhou accelerates digital RMB rollout—China's new blueprint for cross-border payments?
The launch of digital RMB is not intended to replace Web3 payments, but rather to draw on their efficient and convenient features, while addressing practical challenges such as inefficiency and high costs arising from China's decision not to adopt cryptocurrencies as payment instruments.
Navigating Web3 tides with focused insightsAuthors: Iris, Liu Honglin
There is a type of virtual currency that, while appearing no different from other tokens, operates independently outside Web3—this is CBDC (Central Bank Digital Currency).
Backed by national credit, CBDC resolves the regulatory challenges posed by decentralized cryptocurrencies while inheriting the compliance and stability of traditional financial systems. As such, it has been embraced by countries and regions worldwide as a new payment tool for the digital economy era. From the European Central Bank to the U.S. Federal Reserve, major global economies are accelerating CBDC research and pilot programs to gain an edge in digital payments.
In this global race, China is undoubtedly at the forefront.
Recent Developments in Digital RMB
While other countries have adopted open approaches toward cryptocurrencies, China has actively advanced in the digital currency space since launching its digital RMB (e-CNY), becoming one of the earliest nations to explore central bank digital currencies (CBDC). As early as 2014, the People's Bank of China initiated research and development on digital RMB, officially entering the pilot phase in 2020.
After years of testing and expansion, digital RMB has been piloted in multiple cities including Shenzhen, Beijing, and Shanghai, widely applied in retail payments, government subsidies, and public services. As a legal tender issued by the central bank, digital RMB combines the convenience of electronic payments with the legal tender status of cash. It enables seamless online and offline transactions while offering enhanced security and regulatory control.
On January 6, 2025, Guangzhou’s Financial Committee Office released the “Action Plan for Advancing Guangzhou’s Digital RMB Initiatives,” aiming to further promote innovative applications of digital RMB. The plan emphasizes cross-border payments and supply chain finance, seeking to build a more comprehensive digital RMB ecosystem and deepen its integration into international trade and financial networks—providing an innovative pathway for RMB internationalization.
As competition intensifies in the global payment system—especially with Web3 leveraging PayFi and cryptocurrency-based cross-border payments to seize early advantages—how can digital RMB help China stand out in this arena?
Compliance Challenges of Web3 Payments
When discussing Web3 payments, low cost and high efficiency are frequently highlighted. However, this innovative payment method faces complex compliance barriers and implementation difficulties, particularly regarding regulatory transparency and fund security.
Web3 payments rely on on-chain transactions, allowing users to transfer funds directly via wallet addresses, bypassing traditional banking systems. While this appears efficient, it creates regulatory risks. Without mandatory identity verification, tracking fund flows becomes difficult—contradicting anti-money laundering (AML) and know-your-customer (KYC) requirements—and raises concerns among regulators about on-chain payment safety.
In cross-border payments, although Web3 overcomes the cumbersome processes of traditional interbank settlements, it must contend with divergent regulations across jurisdictions. For instance, some users depend on U-cards or VCCs (virtual credit cards) for transactions. While convenient, these tools often operate in gray areas, lacking both financial safeguards and compliance assurance. If platforms encounter policy changes or technical vulnerabilities, user funds may be at risk.
Moreover, while bypassing traditional banks helps reduce time and fees in cross-border transactions, network congestion and fluctuating gas fees introduce uncertainty in costs and efficiency. Even stablecoins, used to mitigate price volatility, face issues related to reserve transparency and settlement mechanisms, making them insufficient for meeting regulatory demands on cross-border capital flows.
Critically, Web3 payments often require multiple intermediaries to convert cryptocurrencies into fiat currencies before final settlement. This process involves complex review procedures and high service fees, increasing both transaction costs and operational risks within the value chain.
For these reasons, despite their technological advantages, Web3 payments still face significant hurdles due to inconsistent global compliance standards and high barriers to fiat integration. These pain points create room for innovation—and opportunity—for digital RMB.
Digital RMB’s Solution
The Web3 industry holds mixed views toward CBDC.
On one hand, Web3 critics argue that CBDC contradicts decentralization principles, viewing centrally issued currencies as susceptible to government control and incompatible with Web3’s vision of free markets. On the other hand, CBDC bridges the gap between state regulation and digital payments—its centralized nature actually provides a compliant foundation for the payment market, alleviating tensions caused by decentralization.
In China, cryptocurrencies are not recognized as legal tender and are currently classified only as property, disallowing their use in payments. In contrast, digital RMB, as the digital form of national legal tender, inherently possesses monetary status and is directly issued by the central bank, enjoying full sovereign backing.
In terms of fund transfers, digital RMB inherits the regulatory standards of the traditional banking system, ensuring compliance and security in domestic and cross-border settlements. Unlike Web3’s reliance on anonymous on-chain transactions, digital RMB adopts the principle of “controllable anonymity,” where user identities and transaction records are managed by the central bank and designated operating institutions. This satisfies KYC and AML requirements while protecting personal privacy without excessive exposure. Additionally, digital RMB uses a “two-tier operation system”: the central bank handles issuance and oversight, while commercial banks and payment institutions manage distribution and promotion. This structure leverages the PBOC’s regulatory strength while preserving market-driven flexibility in innovation.
In cross-border payments, digital RMB has already achieved initial success.
The mBridge project—a multilateral central bank digital currency initiative co-developed by the People’s Bank of China—is a key step toward enabling digital RMB in cross-border settlements. Led jointly by the central banks of China, Hong Kong, Thailand, and the UAE, along with the Bank for International Settlements (BIS), mBridge aims to build a blockchain-based cross-border payment platform. Using distributed ledger technology (DLT), the mBridge connects central banks directly, providing real-time clearing and settlement, reducing intermediaries, improving capital efficiency, and ensuring compliance and traceability of fund flows.
Unlike Web3 payments that depend on on-chain intermediaries for clearing, digital RMB enables direct settlement through central banks—reducing costs and enhancing efficiency while effectively mitigating financial and compliance risks. This gives digital RMB a natural advantage in fields such as supply chain finance, cross-border trade, and e-commerce.
Man Kun Law Firm Summary
According to Man Kun Law Firm, the introduction of digital RMB is not intended to replace Web3 payments, but rather to adopt their efficiency and convenience while addressing practical issues stemming from China’s non-adoption of private cryptocurrencies—such as inefficiency and high transaction costs.
As many countries embrace cryptocurrencies and Web3 payments, cross-border transactions and the digital economy have become crucial drivers of international competitiveness. The rollout of digital RMB not only establishes a compliant and secure infrastructure for China’s digital payment system but also opens up innovative, efficient, and controllable pathways for cross-border settlement and international trade.
Through this model, China stands to seize opportunities in the digital economy while maintaining financial stability, positioning itself more advantageously in the global payment landscape.
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