Published on Monday, October 18, 2021

China | All you need to know about the Central Bank Digital Currency e-CNY

We analyze the motivations of the PBoC to promote CBDC, how we define it and how it is going to operate. We also discuss some special characteristics of e-CNY and its potential risks on financial stability etc.

Key points

  • Key points:
  • Amid the wave of China's prevailing digital payment and to compete with other cryptocurrencies, the PBoC promotes the usage of e-CNY in a bid to support digital transformation and inclusive finance.
  • E-CNY is the digital version of Chinese fiat currency issued by the PBOC and operated by the "two-tier" system by the PBoC and the authorized banks and financial institutions.
  • E-CNY will coexist with physical CNY for a long time; it is mainly designed for domestic retail transactions instead of wholesale transactions; it could be used offline, and has the “managed anonymity” feature.
  • In order to deal with potential risks of e-CNY for financial disintermediation and credit squeeze, the PBoC carefully designs e-CNY as zero interest rate paid and intrinsically the same as physical CNY.
  • We do not anticipate the PBoC promotes cross-border usage of e-CNY particularly for the purpose of pressing ahead RMB internationalization.

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