China and Kazakhstan Team Up to Explore Central Bank Digital Currency (CBDC) Concept

Under the deal, China and Kazakhstan will jointly explore the concept of CBDCs, including retail and wholesale iterations, to improve their financial ecosystems.

China and Kazakhstan have signed a memorandum of understanding (MoU) to jointly explore the concept of central bank digital currencies (CBDCs), including retail and wholesale iterations, to enhance their financial ecosystems.

This historic partnership follows Chinese President Xi Jinping’s visit to Kazakhstan in early July, during which cross-border transactions were a key topic of high-level discussions.

The agreement is widely expected to pave the way for both nations to utilize their homegrown CBDCs for bilateral trade settlements, reducing their reliance on the dollar.

Trade volumes between China and Kazakhstan have surged since the start of the decade, reaching a new all-time high of $41 billion in 2023.

In a bid to promote the use of their local currencies and embrace the benefits of digitization, China and Kazakhstan are both actively pursuing CBDCs.

While Xi’s statement did not provide specific details, observers anticipate that state-backed oil and gas transactions will be settled using CBDCs, and some expect the development of robust cross-border retail offerings.

Both countries are not new to the CBDC scene. Kazakhstan notably completed its digital tenge pilot in late 2023.

A report by the National Bank of Kazakhstan revealed that the digital tenge showed promise for a commercial rollout following studies involving simple payments.

While Kazakhstan’s CBDC development is still in its early stages, the digital tenge already boasts impressive capabilities, such as programmability and tokenization.

China, on the other hand, has become the global leader in CBDCs, having undertaken an extensive four-year pilot.

As the mainstream rollout of the digital yuan approaches, the People’s Bank of China (PBoC) has tested use cases in transportation, securities, cross-border trade, and hospitality.

Xi’s fifth visit to the Central Asian country since assuming office saw both countries sign several partnership deals, including commitments to support Kazakhstan’s joining BRICS and mutual visa-exemption arrangements.

“China will work shoulder to shoulder with Kazakhstan on the path to national prosperity and rejuvenation,” said Xi.

“Let us jointly draw up a new blueprint for closer cooperation and open a new chapter in China-Kazakhstan friendly relations.”

Leaning on mBridge?

Following the signing of the MoU, there has been speculation that China and Kazakhstan may be utilizing the cross-border CBDC platform mBridge to achieve their goals.

However, there are currently some obstacles to this integration, namely the absence of Kazakhstan as a core team member.

Kazakhstan has participated in the CBDC project as an observer and may formally signal its intention to become a core participant after the Bank for International Settlements (BIS) completes advanced studies.

Observers have interpreted the rollout of a minimum viable product (MVP) as a strong statement of intent, with the project showing promise for seamless cross-border settlements.

The above is the detailed content of China and Kazakhstan Team Up to Explore Central Bank Digital Currency (CBDC) Concept. For more information, please follow other related articles on the PHP Chinese website!