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China to explore cross-border payments in digital yuan

EconomyJul 16, 2021 10:06AM ET
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2/2 © Reuters. FILE PHOTO: A sign indicating digital yuan, also referred to as e-CNY, is pictured on a vending machine at a subway station in Shanghai, China April 21, 2021. REUTERS/Aly Song 2/2

BEIJING (Reuters) -China's central bank said on Friday it will explore cross-border payments in digital yuan, and is willing to discuss setting global standards for digital fiat currency to jointly develop the international monetary system.

The People's Bank of China (PBOC) will strengthen data security and personal information protection as it forges ahead with domestic testing of the digital yuan, it said in a white paper that is the first comprehensive disclosure of its plans.

China is a front-runner in the global race to launch central bank digital currencies (CBDC) and is testing a digital yuan, or e-CNY, in major cities including Shenzhen, Beijing and Shanghai but has not set a timetable for its official rollout.

Many analysts believe the e-CNY will bolster the currency's global status as China seeks ultimately to break the dominance of the dollar settlement system.

"The internationalisation of a currency is a natural result of market selection," the PBOC said in the white paper, downplaying its global ambition.

"Though technically ready for cross-border use, e-CNY is still designed mainly for domestic retail payments at present."

The PBOC said it will explore cross-border payment programs in coordination with other central banks, "preconditioned on mutual respect to monetary sovereignty and compliance".

The PBOC "is willing to participate actively in international exchanges of views on digital fiat currency and discuss standards setting ... in order to jointly advance the development of the international monetary system," it added.

The e-CNY digitalises a portion of China's physical notes and coins, and adopts a two-tier distribution system, under which PBOC issues the digital currency to banks, which pass the money to individuals and companies.

INFORMATION SECURITY

In an apparent attempt to ease concerns over government surveillance, the PBOC on Friday vowed to protect personal information and privacy, while also guarding against misuse of e-CNY in Internet gambling, money laundering and tax evasion.

The e-CNY system collects less transaction information than traditional payment, and does not provide information to third parties or other government agencies unless stipulated otherwise in laws and regulations, the PBOC said.

Internally, the PBOC sets up a firewall for e-CNY-related information, and strictly implements privacy protocols, it said.

The PBOC cited the rapid growth in cryptocurrencies, especially global stablecoins, as a driver for research and development of e-CNY.

Cryptocurrencies' lack of intrinsic value, acute price fluctuations, low trading efficiencies and huge energy consumption make them unfit for use in daily economic activities, the PBOC said in the white paper.

"In addition, cryptocurrencies are mostly speculative instruments, and therefore pose potential risks to financial security and social stability."

In late May, China's state council, or cabinet, vowed to crack down on bitcoin mining and trading activities, citing underlying financial risks.

China to explore cross-border payments in digital yuan
 

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Comments (3)
Limin Tandiono
Limin Tandiono Jul 17, 2021 9:38AM ET
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China rise to become the world superpower is inevitable. Nothing to worry about. China is not a colonial country that seek to colonialize other countries. The only countries that worry are western countries. It reflects their own behaviour of believing the powerful countries must colonialize the less powerful ones, which they had did exaxtly in the past.
Nordin Mohamad
Nordin Mohamad Jul 16, 2021 12:12PM ET
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subscribing digital yuan like giving yr neck to ccp ...
David David
David9 Jul 16, 2021 12:12PM ET
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why...explain yourself...
David David
David9 Jul 16, 2021 10:51AM ET
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I told you guys... forget all the sanction this and that on China... we forced them to go this path and I see they will be successful with their digital yuan... if this works, no more sanctions can work...
 
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