PBOC’s Mu says digital yuan has little impact on financial system

(Bloomberg) — China’s digital yuan has so far had a very weak impact on the financial sector, according to the head of the central bank’s digital currency unit.

The balance of e-CNY wallets is about 470 million yuan ($73.9 million), compared to the M0 money supply, which refers to cash in circulation, of 8.6 trillion yuan, Mu Changchun , director of the Digital Currency Institute at the People’s Bank of China, said in an online forum hosted by the Atlantic Council.

There has been no negative impact on the financial system so far, Mu said, adding that he does not expect e-CNY to have a significant “negative disintermediation effect”. in the area. The digital yuan will also boost financial inclusion, he said.

Other highlights of his speech:

  • E-CNY makes financial services more accessible to people in remote areas and enables foreign visitors who do not have a bank account to enjoy the benefits of mobile payment
  • E-CNY is designed to pay no interest, to reduce competition with bank deposits
  • The e-CNY adopts a two-tier system, which means that the PBOC first issues the e-CNY to commercial banks, which then distribute it to the public. This design keeps commercial banks up to date
  • Must strike a balance between anonymity and combating criminal activity
  • There are four levels of e-CNY wallets, each with different levels of anonymity and balance limits
  • China’s Personal Information Protection Law states that telecommunications networks cannot provide user identities to third parties, so wallets opened only with mobile numbers are anonymous to the PBOC
  • Will continue to advance e-CNY pilots with no official launch schedule, and users are so far only a small percentage of the population compared to other payment platforms
  • The PBOC has proposed three principles for the cross-border use of central bank digital currencies: no disruption, compliance, interoperability
  • For future cross-border transactions, all e-CNY will be converted into foreign currencies before being sent to a foreign country, to minimize risks such as currency substitution.

©2022 Bloomberg LP

Source link

Don F. Davis