China continues to lead in developing its central bank digital currency (CBDC) as it now considers giving it a legal foundation in an upcoming law revision, reported South China Morning Post.
In the past few weeks, the trial of the digital yuan in the real world took place through the giveaway of 50,000 digital “red packets”— a series of trials have been conducted in Suzhou, Shenzhen, Chengdu, and Xiongan — and now the central bank is also addressing all the problems that emerged in the pilot tests.
According to the media report, The People’s Bank of China (PBoC) published a draft law on Friday that would give the Digital Currency Electronic Payment (DCEP) system a legal status.
For the first time, it included the digital yuan, which was also defined as part of its sovereign fiat currency.
As per the draft law, issuing yuan-backed digital tokens by any party or any plans to replace the renminbi in the market would be forbidden.
DCEP, meanwhile, will be allowed to be circulated and converted like coins and physical banknotes.
“Its centralised management will be good to fight against cryptocurrencies and global stablecoins and prevent their erosion of currency-issuance rights,” Mu Changchun, head of the central bank’s digital currency research institute, said on Sunday at the Bund Summit in Shanghai.
The central government has already made clear that DECP won’t replace cash, but there are some domestic concerns related to its convertibility, privacy, and safety. Mu touched on these potential pitfalls as he said,
“The PBOC will also face anti-counterfeit issues in the digital era, and we must lower the cost.”
He further added that the central bank would be asked: “to coordinate the construction of digital currency application scenarios for the purpose of identification.”
A digital yuan product suitable for those senior citizens that don’t use smart terminals is also in development.
As for the threat the government-led project poses to private mobile tools like WeChat Pay and Alipay, Mu said they are just electronic wallets while the DCEP is the money inside them as such “not competitors.”