News Center



Home News Center News

China’s CBDC: Genesis, Design and Implications

Apr 26-2021   



The People’s Bank of China (PBC) was among the first in the world to explore central bank digital currency (CBDC) and will probably be one of the first major central banks issuing its own CBDC. In an article for China Economic Journal, Prof. Huang Yiping and Ph.D. student Li Shiyun, both of the NSD, expound on the construction of the e-CNY and discuss its likely implications. Prof. Huang is Deputy Dean of the NSD and Director of the Institute of Digital Finance at PKU.

 

The bourgeoning of digital currency is closely related to the predicaments of the US dollar as the international currency. To fulfill rising demands for the greenbacks, the Federal Reserve has been resorting to expanding current account deficits – the typical Triffin Dilemma. Therein arises the need for a pure-play international currency, which is made possible by the advent of digital encrypted technology.

 

Beset by some innate defects such as lack of intrinsic value and legal compensation, Bitcoin and Stablecoin can’t take on such a role. CBDC, backed by national credit, seems to offer the way out.

 

The PBC has completed the overall design of DC/EP and started trials, though the system is laid out with caution. Besides being the legal currency, being backed by state credit and having legal compensation, the CBDC possesses five features and is bound to impact heavily on mobile payment, commercial banking and RMB internationalization. One of the features is a two-tiered operating system in which the PBC will exchange CBDC with major banks, payment platforms and telecom operators, which then handle CBDC business with the public.

 

While the PBC tries hard to avoid causing disintermediation of commercial banks, it remains to be seen if there will be s shift from commercial banks savings accounts to the new e-CNY wallet, says the article. With regard to existing mobile payment system and the associated collection of analyses of big data in the Fintech sector, e-CNY’s impacts could be profound.

 

Thanks to its convenience, the CBDC might put some wind in the sail of RMB internationalization. However, the two authors reckon that since the CBDC is primarily intended as a substitute of M0 at current stage, it has a long way to go before becoming an international currency.

 

China Economic Journal is an English-language periodical affiliated with the NSD and CCER. It’s published by Routledge Journals, part of Taylor & Francis, for a global readership.

China’s CBDC: Genesis, Design and Implications

Apr 26-2021   



The People’s Bank of China (PBC) was among the first in the world to explore central bank digital currency (CBDC) and will probably be one of the first major central banks issuing its own CBDC. In an article for China Economic Journal, Prof. Huang Yiping and Ph.D. student Li Shiyun, both of the NSD, expound on the construction of the e-CNY and discuss its likely implications. Prof. Huang is Deputy Dean of the NSD and Director of the Institute of Digital Finance at PKU.

 

The bourgeoning of digital currency is closely related to the predicaments of the US dollar as the international currency. To fulfill rising demands for the greenbacks, the Federal Reserve has been resorting to expanding current account deficits – the typical Triffin Dilemma. Therein arises the need for a pure-play international currency, which is made possible by the advent of digital encrypted technology.

 

Beset by some innate defects such as lack of intrinsic value and legal compensation, Bitcoin and Stablecoin can’t take on such a role. CBDC, backed by national credit, seems to offer the way out.

 

The PBC has completed the overall design of DC/EP and started trials, though the system is laid out with caution. Besides being the legal currency, being backed by state credit and having legal compensation, the CBDC possesses five features and is bound to impact heavily on mobile payment, commercial banking and RMB internationalization. One of the features is a two-tiered operating system in which the PBC will exchange CBDC with major banks, payment platforms and telecom operators, which then handle CBDC business with the public.

 

While the PBC tries hard to avoid causing disintermediation of commercial banks, it remains to be seen if there will be s shift from commercial banks savings accounts to the new e-CNY wallet, says the article. With regard to existing mobile payment system and the associated collection of analyses of big data in the Fintech sector, e-CNY’s impacts could be profound.

 

Thanks to its convenience, the CBDC might put some wind in the sail of RMB internationalization. However, the two authors reckon that since the CBDC is primarily intended as a substitute of M0 at current stage, it has a long way to go before becoming an international currency.

 

China Economic Journal is an English-language periodical affiliated with the NSD and CCER. It’s published by Routledge Journals, part of Taylor & Francis, for a global readership.