China's yuan has become one of the five most widely used currencies in global payments, an international financial transactions agency announced Wednesday.

The yuan passed the Canadian and Australian dollars in popularity in December, according to the Society for Worldwide Interbank Financial Telecommunication, which provides communications between financial institutions and companies. It said the yuan now ranks behind the dollar, the euro, the British pound and Japanese yen.

The change is an "important milestone," and confirms the yuan's transition from an emerging to a "business as usual" currency, said Wim Raymaekers, Swift's head of banking markets, in a statement.

Beijing is gradually easing controls on the yuan and encouraging its use abroad in an effort to reduce costs for its traders and increase Chinese companies' role in the global economy.

The yuan's exchange rate is set by China's central bank and the currency doesn't trade freely on global markets. But Beijing has signed agreements with a number of foreign financial centers including London to become hubs for clearing yuan transactions.

The yuan, also known as the renminbi, accounted for 2.17 percent of global payments in December, behind the yen's share of 2.69, according to Swift. The U.S. dollar's share is about 45 percent.

Global payments in yuan increased by 20.3 percent in December, outpacing overall payments growth of 14.9 percent, according to Swift.