According to the head of China’s central bank’s digital currency unit, the digital yuan has had a very small impact on the financial sector thus far.
The balance in e-CNY wallets is approximately 470 million yuan ($73.9 million), compared to the M0 money supply, which refers to cash in circulation, of 8.6 trillion yuan, according to Mu Changchun, head of the People’s Bank of China’s Digital Currency Institute, in an online forum hosted by the Atlantic Council.
So far, there has been no negative impact on the financial system, according to Mu, who also believes that the e-CNY will not have a significant “negative disintermediation effect” in the sector. According to him, the digital yuan will also improve financial inclusion.
Other highlights of his speech include:
- E-CNY makes financial services more accessible to people in remote areas, and it allows foreign visitors who do not have bank accounts to take advantage of mobile payment services.
- E-CNY is intended to pay no interest in order to compete with bank deposits.
- The e-CNY operates on a two-tier system, which means that the PBOC first issues e-CNY to commercial banks, who then distribute it to the general public. This design aids in keeping commercial banks informed.
- It is necessary to strike a balance between anonymity and combating criminal activity.
- There are four tiers of e-CNY wallets, each with varying degrees of anonymity and balance limits.
Because China’s personal information protection law prohibits telecommunication networks from disclosing users’ identities to third parties, wallets opened with only mobile phone numbers are anonymous to the PBOC. Will continue to advance e-CNY pilots with no timetable for official launch, and users currently account for a small percentage of the population in comparison to other payment platforms.
The PBOC proposed three principles for the use of central bank digital currencies across borders:
- no disruption
To reduce the risk of currency substitution in future cross-border transactions, all e-CNY will be converted to foreign currencies before being sent to a foreign country.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.