Use of the word “e-CNY” commonly refers to this domestic, retail payments infrastructure. The pilots test real-world scenarios for CBDC use cases, and while adoption has been low, the broad range of applications suggest that testing, not adoption, is the priority for now. PBOC’s ambition for an all-encompassing domestic network of e-CNY infrastructure raises questions about the state’s ability and reach in controlling citizens’ activities. China has already increased bank’s short term liquidity by $118 billion and long term liquidity by $72 billion through reducing reserve ratio requirements this year. As China devises a strategy to stimulate consumer spending this year, there is an opportunity to do so by using and expanding the e-CNY network. Unlike other central banks, the PBOC is not fully independent, and requires the State Council to sign off on decisions relating to money supply and interest rates, and the State Council has been tracking PBOC’s research into e-CNY since approving the initial plan in 2016.įrom a monetary policy perspective, the e-CNY infrastructure could be a handy tool in the hands of the PBOC, with which it can increase or decrease money supply. This reshuffle in authority signals further centralization of power under the party apparatus. The PBOC is also opening up 31 new provincial-level branches signaling deeper coordination between the PBOC and provincial level authorities. The PBOC has lost its authority over financial holding companies and financial consumer protection regulation to a new regulator, the State Administration of Financial Supervision, which will also oversee banking and insurance regulation. Interestingly, on the regulatory side, at the National People’s Congress in early March, there were a few changes announced to China’s financial regulators. The expanded network of use cases across applications that would collect data on personal identification, health information, and consumption habits and behavior should also raise concerns around the vulnerability of such data to cyber threats domestically and abroad. ![]() The universe of expanded economic networks enabled by the e-CNY has rightly created concerns regarding the centralization of authority by the PBOC, and the resulting impacts on freedom of choice and from state surveillance for its users. ![]() Over the last few years, the PBOC, like the broader Chinese state apparatus, has displayed a tendency toward centralizing regulatory authority when it comes to the two sectors at the intersection of CBDCs -finance and technology. It is also aiming to reach AliPay and TencentPay/WePay customers through integrating their wallet and e-commerce functions for e-CNY distribution. Already, the PBOC is looking to reach the margins of society: e-CNY is being tested amongst elderly populations and in broader rural connectivity schemes initiated to improve digitization. These domestic test cases are likely to expand this year and cover a broader range of activities and regions. Some of these projects are described in the table below. The pilots have also begun testing technical and programmability functions like smart contracts for B2B and B2C functions, e-commerce and credit provision. So far, common use-cases being tested include public transportation, public health checkpoints including COVID test centers, integrated identification cards to receive and pay utilities such as retirement benefits and school tuition payments, as well as tax payments and refunds. From the start, the PBOC’s objective within its borders has been to not just to compete in China’s domestic payments landscape, which is dominated by two “private” players-AliPay and TencentPay/WePay-but to expand the universe of economic activities that are included the state-enabled payments network. As the pilot regions have expanded to 25 cities, so have the real-world use-cases tested through the pilots. ![]() Domestic ambitionsĮven with its persistent low adoption rates, the e-CNY is by far the largest CBDC pilot in the world by both the amount of currency in circulation- 13.61 billion RMB-and the number of users- 260 million wallets. Globally, China is less focused on internationalizing the RMB than it is on setting technical and regulatory standards that will define how other countries’ central bank digital currencies will work going forward. Domestically, the People’s Bank of China (PBOC) is still in test-and-learn mode, prioritizing experimentation over adoption. ![]() As the e-CNY network has expanded over the last 12 months, China’s goals have become clearer. It’s been a year since the Beijing Olympics, where China’s central bank digital currency (CBDC), the e-CNY, debuted in front of an international audience. ApPractice makes perfect: What China wants from its digital currency in 2023
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