The central People’s Bank of China (PBoC) released a digital yuan, e-CNY, whitepaper, in order to “explain the background, objectives, and visions” and to “seek public comments.”
At the same time, the central bank once again criticized decentralized cryptoassets, such as bitcoin (BTC), claiming that they don’t have intrinsic value, are volatile, and require “huge energy consumption.”
“They can hardly serve as currencies used in daily economic activities,” the PBoC said, adding that cryptoassets are mostly speculative instruments and pose a potential risk to financial security and social stability.
The bank also stressed that “global stablecoins” “will bring risks and challenges to the international monetary system.”
Meanwhile, per the PBoC, during an e-CNY pilot, as of June 30, the token has been applied in over 1.3m scenarios, covering utility payment, catering service, transportation, shopping, and government services.
“More than 20.87m personal wallets and over 3.51m corporate wallets had been opened, with transaction volume totaling 70.75m and transaction value approximating RMB 34.5bn [USD 5.3bn],” the bank said. It also revealed that smart contracts were used to make the e-CNY programmable.
The PBoC defined e-CNY as the digital version of fiat currency issued by this bank – “a value-based, quasi-account-based and account-based hybrid payment instrument, with legal tender status and loosely-coupled account linkage.”
E-CNY’s features are given as follows:
- it is the fiat currency issued by the central bank, same as the physical form of RMB, and is China’s legal tender;
- it is mainly a substitute for cash in circulation, and will coexist with physical RMB; as long as there is demand for the physical RMB, the PBoC will neither stop supplying it nor replace it via administrative order;
- it adopts a centralized management model and a two-tier operational system: the right to issue e-CNY belongs to the state, with the PBoC being at the center of the e-CNY operational system, but the authorized operators and other commercial institutions exchange and circulate e-CNY to the public;
- it is a retail CBDC, issued to the public, and it mainly serves domestic retail payment demands;
- in the future digital retail payment system, e-CNY and funds in the electronic account of authorized operators are inter-operable, and both constitute cash in circulation.
E-CNY carries and pays no interest, and payments through e-CNY wallets are settled upon payment. Furthermore, e-CNY does not charge authorized operators for exchange and circulation services, and the operators do not charge individual clients for the exchange of e-CNY either.
It also follows the principle of “anonymity for small value and traceable for high value.” The bank claims that the system collects less transaction information than traditional electronic payment, and that it does not provide information to third parties or other government agencies “unless stipulated otherwise in laws and regulations.”
The bank said it will explore pilot cross-border payment programs and “will work with relevant central banks and monetary authorities to set up exchange arrangements and regulatory cooperation mechanisms on digital fiat currency in line with the principle of “no detriment,” “compliance,” and “interconnectivity”.”
The accompanying wallet
As for the wallet, the PBoC makes the rules, while authorized operators jointly develop and share apps on mobile devices, said the whitepaper. “They manage wallets, authenticate e-CNY, and develop wallet ecological platforms to enable operator-specific visual system and special features as well as online and offline applications in all scenarios.”
There are personal and corporate wallets, depending on the type of holder; software and hardware wallets, depending on the carrier; and parent and sub-wallets, depending on the authorization.
Authorized operators assign different types of digital wallets to customers based on the strength of their personal information identification, and set per-transaction and daily limits and maximum balance according to the strength of real-name information.
No date for the final launch
The PBOC will continue to “prudently advance the pilot e-CNY R&D project” in line with their Five-Year Plan, but with no preset timetable for the final launch, they said.
Previously, the PBoC claimed that plans to take the token to the next stage in time for the Beijing Winter Olympics next year were in place, although it stopped short of claiming that a full national rollout would have been completed before the games begin in February.
With the development in the digital economy, the share of transactions using cash is declining in China. Per a 2019 PBoC survey, the number and value of transactions via mobile payment accounted for 66% and 59% percent of the total, while those paid in cash accounted for 23% and 16%, and those paid by card 7% and 23%, respectively. 46% percent of the respondents used no cash in any transaction during the survey period. Meanwhile, the cost of cash management is quite high, the bank noted.
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(Updated at 10:47 UTC: updates throughout the entire text.)