The time for China to focus more on using its own financial messaging network to settle cross-border transactions in the mainland, Hong Kong and Macau is near, a new report by BOC International (BOCI) has suggested. Co-authored by a former director of the international payments department at the State Administration of Foreign Exchange (SAFE) and now BOCI’s chief economist, Guan Tao, the report by the investment bank recommends for a greater use of China’s Cross-Border Interbank Payment System (CIPS) instead of the Belgium based SWIFT system, Reuters says.

This to reduce exposing more of China’s global payments data to the U.S. should sanctions are levied against Chinese banks that still serve officials who implement the new national security law for Hong Kong. Cutting off Chinese banks’ access to the SWIFT financial messaging service is a potential measure that the U.S. may explore in the wake of the worsening relationship between the two largest economies.

The CIPS came to being in 2015 as part of efforts to build infrastructure to support the development of RMB business after the Chinese currency became the second largest cross-border payment currency in China and the fourth most used globally. The call for and probable full CIPS usage will likely spark talks of China’s digital currency plans again especially as the country’s Digital Currency Electronic Payment (DCEP) project is expected to accelerate the “internal cycle” of its economy. While the People’s Bank of China has shared efforts to get the DCEP off the ground though no official launch date has been announced, China has been at the forefront of the race to create a central bank digital currency (CBDC), a move that has since seen several other countries – the latest being the Philippines – try to look into the initiative.

China’s digital currency, which will be pegged to the national currency, has been under development for some years but started trialling payments with it this year in four major cities  – Shenzhen, Suzhou, Chengdu, as well as a new area south of Beijing, Xiong’an. It builds on China’s development of a blockchain cross-border financing pilot which a deputy head of  SAFE, Lu Lei, had shared late last year to be consistent with the regulator’s expanding digital currency ecosystem as the only one registered by a central state agency at the Cyberspace Administration of China.

There have been a wide range of cross border use cases suggested for China’s digital currency. Aside from its likely usefulness in the Belt and Road Initiative, part of the information that emerged from the October 18 session at the World Bank IMF Annual Meeting hints at China planning to use its digital currency in Africa and the Caribbean; a disclosure at the last summit of the BRICS member countries – Brazil, Russia, India, China and South Africa – also mentioned the consideration for issuing a digital currency which could be interlinked.

Coming particularly now after the recent decision by the U.S. Office of the Comptroller of the Currency to allow national banks in the U.S. to hold cryptocurrency assets on behalf of their customers, a full switch to CIPS use will somewhat fuel China’s ambition to challenge the US dollar dominance with the planned digital currency as once suggested by a former chief economist at the IMF, Kenneth Rogoff.