The Digital Yuan

Abstract

Central banks around the world are currently investigating and developing central bank digital currencies for various reasons. However, few projects are as advanced as the Chinese digital yuan. Originally developed for the domestic retail payment market, the digital yuan can also be used for cross-border transactions, where it is expected to ease many frictions in the current trade finance system. Regarding the digital yuan’s impact on trade finance, there are two potential scenarios to consider, a retail and wholesale scenario, which are not mutually exclusive. As China has become one of the most important trading partners of Switzerland, the potential changes associated with the digital yuan and its potential application on trade finance blockchain platforms are also of importance for Swiss banks, which are a key trade facilitator for Swiss companies. The trade finance business model of Swiss banks is analyzed, potential impacts of the digital yuan are outlined and resulting opportunities and threats are discussed and validated with subject matter experts. Finally, the findings are mapped to the business model to determine, whether the digital yuan can impact the trade finance business model of Swiss banks. This thesis reveals that there are potential impacts of the E-CNY throughout the trade finance business model of Swiss banks.