China Galaxy Investment Management, which has 13 million brokerage customers, will run a digital yuan pilot for securities transactions in association with ICBC Bank, the state-owned bank that is the world’s largest. The project has been accepted into a Beijing sandbox.
China’s central bank digital currency (CBDC) or eCNY will be used for three types of transactions. The first is to pay fees for data, consulting and other services.
It will also be used to settle over-the-counter stock transactions in the “tripartite deposit management system.” To explain what that is, in China, the broker doesn’t handle cash. Instead, the broker opens an account with a bank and refers its clients to do the same. Hence, any cash deposited by the client doesn’t go directly to the broker but instead to their own account at the broker’s bank. When the client buys shares, the money is transferred from the special client’s account to the broker’s bank account. So for the digital yuan trial, digital currency will be used instead of using a bank account.
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