Today the People’s Bank of China published a white paper for the e-CNY or digital yuan, including in English. It reiterates previous messages but clarifies some issues. For example, the former central bank governor had previously stated that the state banks issued the e-CNY against central bank deposits, a synthetic CBDC. Today’s whitepaper explicitly states the central bank digital currency (CBDC) is issued by the central bank and commercial banks merely distribute it.
Through the end of June, individuals opened almost 21 million wallets and corporates started another 3.4 million wallets. RMB 34.5 billion ($5.34bn) was processed across 70.75 million transactions. This gives an average transaction value of RMB 488 ($75.47), which is less than half the average in October last year.
The paper outlines the primary objectives of the digital yuan. Firstly, the aim is to ensure financial inclusion and provide a public good digital cash while physical cash usage declines. Digital renminbi holdings will not earn interest.
Promoting fair competition and interoperability between different forms of digital cash is the second stated objective without mentioning dominant mobile payment platforms AliPay or WeChat Pay. It differentiates the e-CNY from other digital payment tools as being legal tender, not requiring a bank account, supporting offline payments and providing ‘managed anonymity’.
This refers to the ability for low value wallets to be set up with only a mobile number. As previously reported, Chinese authorities already have the ability to track payments.
The paper says, “The e-CNY system collects less transaction information than traditional electronic payment and does not provide information to third parties or other government agencies unless stipulated otherwise in laws and regulations.”
A third objective is for cross border payments. The central bank addresses concerns about RMB cross border use by stating, “The internationalization of a currency is a natural result of market selection. The international status of a country’s currency depends on its economic fundamentals and the depth, efficiency and openness of its financial markets.” We observe that while historically, China’s markets have been closed, there is currently a gradual opening.
The whitepaper states that while the digital currency can be used cross border it is “mainly” designed for domestic use. The central bank also acknowledged monetary sovereignty issues and the principle of “no detriment”.
Meanwhile, in other news today, the Pudong district of Shanghai outlined plans to use the digital yuan for cross border trade finance. China’s digital currency pilots continue to accelerate and have now reached more than 10 million people.
