In January 2021, the Belgium-based financial messaging service Society for Worldwide Interbank Financial Telecommunication (SWIFT) established a joint venture with several subsidiaries of China’s central bank, the People’s Bank of China (PBOC). The joint venture, Financial Gateway Information Services Co., Ltd. (金融网关信息服务有限公司), prompted speculation in international media about whether it signaled “that China is exploring global use of its planned digital yuan.”
This speculation appeared to be informed in part by the fact that Mu Changchun, Director of the PBOC's Digital Currency Research Institute, had a seat on the joint venture’s board. In 2019, Mu, in his then role as the deputy director of the PBOC’s Payment and Settlement Department, had also championed SWIFT’s establishment of a wholly foreign owned entity in Beijing. This China-based SWIFT subsidiary, according to sources cited in reporting by the state-owned China Daily, could allow SWIFT "to play a larger and more active role in supporting the internationalization of the Chinese yuan."
The PBOC has made no public comment tying the joint venture to plans for the digital yuan, and public records on the joint venture’s business scope make no mention of it either. However, Wang Yongli, a former SWIFT board member and former vice president at the Bank of China (not to be confused with the PBOC) reportedly backed up the purported association, claiming that the joint venture aimed to “strengthen cooperation with SWIFT and jointly promote the internationalization of the [yuan] and the development of the digital currency.”
For its part, the PBOC, in a statement released last spring, explained that the joint venture’s mission is to ensure stable access to SWIFT for China-based users, following purported incidents of unreliable access for Chinese banks. The statement also mentioned that the venture would establish local “data warehouses” to analyze financial data and ensure compliance with domestic regulations.
A full translation of the PBOC’s statement on the joint venture is included below:
Promoting the construction of financial gateways and improving cross-border financial network and information services
As the opening-up of China’s finance industry to the outside world continuously deepens, domestic financial institutions are increasingly making use of the financial networking and messaging services provided by the Society for Worldwide Interbank Financial Telecommunication (SWIFT). The number of institutions making use of SWIFT and the scope of relevant business are expanding daily, and this places greater demands on the continuity and stability of these services, as well as the compliance and security of the data involved. Previously, a group of small and medium-sized domestic banks experienced unstable connections to SWIFT, which impacted their cross-border business operations. In May 2018, the Bank of International Settlements’ Committee on Payments and Market Infrastructures issued a report, “Reducing the risk of wholesale payments fraud related to endpoint security,” which made clear that stakeholders in financial messaging networks must take measures to jointly maintain financial stability, and required that member central banks push forward implementation of these measures. Currently, many central banks around the world have already issued plans for storing cross-border financial messaging data locally and—through the establishment of local data warehouses—carrying out compliance and prudence analysis.
The People’s Bank of China attaches great importance to these requirements, and in 2018 published the “Notice on Strengthening the Management of Cross-Border Financial Network and Information Services.” In order to further improve the level of cross-border financial network and information services, and protect the legal rights and business continuity of domestic users of SWIFT (hereafter referred to as “users”), SWIFT and four Chinese-funded institutions jointly established Financial Gateway Information Services Co., Ltd. (金融网关信息服务有限公司) to provide users with financial gateway services. These services include the establishment and operation of local network concentration points for financial messaging services, the establishment and operation of local data warehouses, and other related services. SWIFT’s joint development of financial gateway services with these four Chinese-funded institutions is conducive to achieving mutual benefits and win-win dynamics, and provides users with more stable, more resilient, safer, and more compliant services.
As a next step, the People’s Bank of China will strengthen supervision and guidance, and promote the standardized development of financial gateway services by all parties.