The People’s Bank of China (PBOC) has released a new whitepaper relating to the country’s progress with its central bank digital currency (CBDC).
The 15-page document, released on July 16, offers updates on the development of China’s e-CNY, or digital yuan. It also asserted various key definitions, objectives and visions for the project. Including, defining the e-CNY as a digital version of a fiat currency; that it adopts a centralized management model, as well as a two-tier operating system; and that the CBDC would act primarily as a substitute for, and will co-exist with, cash already in circulation.
This is the first whitepaper issued on the topic since development on the digital yuan began in 2014.
Specific clarifications
In many cases, the whitepaper reiterated or elaborated on issues already discussed in prior updates. However, it also clarified other areas. For example, it says that the state is the only one able to issue digital yuan.
“The PBOC lies at the center of the e-CNY operational system,” the whitepaper reads. “It issues e-CNY to authorized operators, which are commercial banks, and manages e-CNY through its whole life cycle. Meanwhile, it is the authorized operators and other commercial institutions that exchange and circulate e-CNY to the public.”
In addition, visitors travelling in China temporarily will be able to use the digital yuan. Reports indicate that travelers will be allowed to set up temporary e-CNY wallets. The whitepaper asserts that it is one of the digital yuan’s objectives to diversify the forms of cash provided to the public.
“As digital technology and electronic payment develop, the use of cash in retail payments has been on a decline,” it asserted. “However, it’s the mandate of the central bank to ensure the public’s direct access to cash, and make sure the unit of account is consistent in the era of digital economy by digitalizing cash.
“Those without bank accounts can enjoy basic financial services provided via e-CNY wallet, and foreign residents temporarily travelling in China can open an e-CNY wallet to meet daily payment needs without opening a domestic bank account.”
Anonymity and privacy
Another point the whitepaper raised regarded anonymity and traceability. An issue that officials have had to clarify in the past. It stated that the digital yuan will support managed anonymity, dedicating an entire section of the whitepaper to the issue. Within this, it also said it will follow a principle of “anonymity for small value and traceable for high value.”
More specifically, they asserted that they aim “to meet the public demand for anonymous small value payment services based on the risk features and information processing logic of current electronic payment system.”
However, the paper also maintained the PBOC’s need “to guard against the misuse of e-CNY in illegal
and criminal activities, such as tele-fraud, Internet gambling, money laundering, and tax evasion.”