![]() ![]() DCEP utilizes “controllable anonymity,” which means, when trading with DCEP, both parties can be anonymous to the public, but the PBoC could still track all trading information in China’s efforts to combat corruption, money laundering, tax evasion, and terrorist financing.While DCEP will first be launched in China’s developed regions, NFC technology could also provide those in remote rural areas without steady internet access or bank accounts with easy access to DCEP DCEP differs from the traditional way of e-payment where a transaction must utilize a third-party intermediary while with DCEP, one may conduct transactions even without the internet or bank account utilizing near-field communication (NFC) technology.Digital currency has a higher level of security against counterfeits.Advantages of a digital currencyĬompared with traditional payment methods, it is expected that China’s DCEP will have the following features and advantages: It is expected that the draft law may become law sometime in 2021.Īs China formulates more laws, regulations, standards, and/or guidelines on digital currency and the circulation and use of DCEP, we will continue to provide updates. The period for accepting public comments ended on November 23, 2020. Moreover, this draft law reiterates that, other than DCEP, there is a wide prohibition on producing and selling of digital tokens in replacement of RMB. The Draft PBoC Law stipulates that RMB includes both physical and digital forms, which provides the legal basis for the issuance of DCEP. In addition, on October 23, 2020, China’s PBoC released the revised draft Law of the People’s Bank of China for solicitation of public comments (“Draft PBoC Law”). The opinion states that China will “strengthen the protection of new rights and interests such as digital currency, online virtual assets, and data.” This opinion begins to afford “digital currency” with some legal protection. Specifically, on July 22, 2020, “digital currency” was cited in an opinion issued by China’s Supreme People’s Court and the National Development and Reform Commission ( Opinion on Providing Judicial Services and Protection for Accelerating the Improvement of the Socialist Market Economic System in the New Era). Fast forward to 2020-in July 2020, the term “digital currency” first appeared in official documents in China. That same year, PBoC formed a digital currency research center. In that same interview, however, he also acknowledged that there was no clear timeline and for a big country like China, it could take 10 years to develop a digital RMB. As early as 2016, the then governor of PBoC announced plans for China to issue a digital RMB. There is currently no existing law regulating DCEP, although the expectation is that China will formulate standards and guidelines for DCEP soon. What are the laws regulating China’s digital currency? DCEP is designed as a replacement of the reserve money system and pegged to the RMB in a 1:1 ratio. It has been issued in small scale by the PBoC in pilot programs but has not yet been formally launched. ![]() What is China’s digital currency?Ĭhina’s digital currency is called Digital Currency Electronic Payment (DCEP)-it is also commonly referred to in China as “e-CNY” or “Digital RMB.” It is the digital form of China’s fiat money. In this article we answer key questions that you may want to know about the digital yuan. Many believe this is another signal that China is actively exploring the internationalization of DCEP. The other shareholders of the joint venture are China’s Cross-border Interbank Payment System (CIPS) and the Payment and Clearing Association of China, both supervised by the PBoC. Interestingly, on January 16, 2021, SWIFT established a joint venture in Beijing with China’s central bank’s, the People’s Bank of China (PBoC), clearing center and its digital currency research institute. More importantly, the launch of DCEP can have significant ramifications on a global scale, as it could reduce China’s reliance on the SWIFT system for international banking and offers the first glimpse of the internationalization of the renminbi (RMB). When DCEP will officially launch in China, there is little doubt that the population can easily adapt to its use. While the concept of a central bank digital currency (CBDC) is not new and many governments around the world are already exploring CBDC and its potential, China’s development and soft launch of DCEP is at a global forefront. The Chinese government has now taken a large leap in financial technology and is poised to launch its digital currency called Digital Currency Electronic Payment (DCEP or “digital yuan”). In 2020, cashless transactions amounted to US$49 trillion, accounting for every four out of five payment transactions. China is operating increasingly on a cashless basis. ![]()
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