CIPS | What it is and how it can affect the foreign exchange market.

Have you heard of CIPS? This acronym stands for Cross-Border Interbank Payment System, in Portuguese. This is an initiative by China to facilitate international transactions in its currency, the yuan (or renminbi).

CIPS was launched in 2015, under the supervision of the People's Bank of China (PBOC), and connects onshore and offshore clearing markets and participating banks. Previously, cross-border yuan settlement was carried out through one of the currency's offshore settlement banks in locations such as Hong Kong, Singapore and London, with the help of a correspondent bank in mainland China.

The aim of CIPS is to reduce transaction costs and processing time, as well as increase the global use of the yuan. China has sought to internationalize its currency since 2009, with an initial focus on trade settlement. In 2015, the yuan became part of the International Monetary Fund's (IMF) basket of special drawing rights, alongside the dollar, euro, pound and yen.

CIPS is an alternative to SWIFT, the code that represents the main system for international payments, whose dominant currency is the United States dollar (US).

But what does this mean for the foreign exchange market and Masfra Banking customers?

CIPS can bring some advantages and disadvantages to those who operate with foreign exchange, depending on each person's profile and needs. Let’s look at some points to consider:

Benefits:

   * CIPS can facilitate and speed up yuan transactions, reducing costs and intermediaries involved. This could be beneficial for those doing business with China or with countries that adopt the yuan as an exchange currency as part of the BRI.

* CIPS can provide greater security and stability for yuan transactions, avoiding possible interference or sanctions from the US or other countries. This could increase confidence and demand for the Chinese currency, which could appreciate in the long term.

* CIPS can diversify currency options to operate with foreign exchange, reducing dependence on the dollar and SWIFT. This can expand business and investment opportunities in different markets and regions, in addition to reducing exchange rate risks.

Disadvantages:

    * CIPS may face resistance and barriers from countries that have alliances or interests with the US or that do not trust China. This may limit the scope and acceptance of the system and the Chinese currency, which still has restrictions on convertibility and movement.

* CIPS may increase competition and rivalry between international currencies and payment systems, generating more volatility and uncertainty in the foreign exchange market. This can affect the expectations and decisions of economic agents, who will have to deal with more complexity and unpredictability.

* CIPS may require more adaptation and updating from customers and exchange service providers, who will have to familiarize themselves with the rules and regulations of the system and the Chinese currency. This may require more time, resources and technical knowledge.

Given this scenario, Masfra Banking is prepared to meet the needs and expectations of its customers, offering innovative and efficient solutions in the foreign exchange sector, with fair, competitive, agile and secure pricing.

Masfra Banking is a fintech exchange and financial transaction structuring consultancy, which has a team of professionals with almost 30 years of experience working in national and international banks.

Masfra Banking's mission is to be recognized as a market reference in innovative and efficient solutions in the foreign exchange sector and banking financial consultancy, providing excellence in services and being recognized as a reliable and specialized partner.

If you want to know more about CIPS, the foreign exchange market or Masfra Banking services, contact us through the channels below:

Phone: 11 2367-1217

WhatsApp: 11-93031-0133

E-mail: contato@masfra.com.br

Site: www.masfra.com.br