A SWIFT Shakeup: Yuan Dethrones Euro as Runner-Up in Trade Finance Markets

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The latest report published by the Society for Worldwide Interbank Financial Telecommunications (SWIFT) has revealed that the Chinese yuan overtook the euro as the second most used currency in trade finance markets. However, the dollar is still comfortably in first place, with more than an 80% share in these payments.

Chinese Yuan Overtakes Euro in Global Trade

The Chinese yuan has overtaken the euro as the second most used global currency in international trade finance markets, according to the Society for Worldwide Interbank Financial Telecommunications (SWIFT), the standard payment solution for cross-border payments.

In its latest RMB Tracker report, which keeps track of the advances of the Chinese yuan on its path to internationalization, SWIFT revealed that the yuan reached a 5.80% share in September, overtaking the European currency. The yuan grew by almost one percent in a month, having scored a utilization of 4.82% in August.

The euro obtained a share of 5.43%, while the Japanese yen placed fourth with a 1.40% share.

For this consideration, SWIFT counted the number of MT400 (advice of payment) and MT700 (issue of a documentary credit) messages by value in the system during September. Nonetheless, considering other messages, the yuan is still the fifth currency for global payments by value, with a share of 3.71%.

U.S. Dollar Strength and Yuan Internationalization

Even with all the recent buzz regarding the end of dollar hegemony due to the abuse of the currency as a geopolitical weapon, the dollar is still the global currency of choice. According to SWIFT data, the U.S. dollar still has an 84.15% share in finance markets.

Also, the dollar is still comfortably in first place as a SWIFT global payments currency, with a share of 46.58%, considering customer and institutional payments made using SWIFT’s messaging system.

The growth of the Chinese yuan as an international currency has been significant, going from being the 35th most used currency in 2001 to becoming a top lister recently. In April, China used more yuan than dollars for international settlements for the first time, signaling its intention to drop its reliance on the American currency.

The future of the internationalization of the yuan might be outside SWIFT, leveraging the strength of the e-CNY, the Chinese central bank digital currency (CBDC), that can escape the constraints of the current financial system.

In August, reports indicated that several central banks were worried about the results of the Mbridge project, a joint CBDC interconnection network project carried out by China, Hong Kong, Thailand, and UAE that would allow billions in trade to flow outside regular channels using the digital yuan.

What do you think about the growth of the internationalization of the digital yuan? Tell us in the comments section below.