Abstract
In response to the rapid rise of privately-issued cryptocurrencies (e.g. Bitcoin, Ethereum, and Diem), global central banks have been leveraging on fintech to roll-out state-backed Central Bank Digital Currencies (CBDCs) to modernise the fiat money system. China is one of a few major economies starting this pioneering financial experiment and launched its own CBDCs – digital yuan (renminbi) in 2020. Legally speaking, CBDCs represent cash like direct claims on the central bank and they are real money in the economic sense to replace physical banknotes and coins. Built upon China’s two-tier banking system, digital yuan substitutes cash in circulation (or “M0”) and primarily targets the retail sector by removing third-party intermediaries. Digital yuan has special characterises such as unlimited legal credit, loosely coupled account, controllable anonymity, and no interest bearing and exchange fees. Clearly, CBDCs have posed great regulatory challenges as the current monetary and banking legal framework had been mostly made for physical currencies. It is suggested that legislators shall update laws in relation to the definition, format, creation, circulation, and counterfeit of digital yuan to help individuals, businesses, and governments to adapt to the new era of CBDC. In this article, the authors analyse China’s Central Bank Digital Currency, the digital yuan and consider its main characteristics and need for regulation.
| Original language | English |
|---|---|
| Pages (from-to) | 601-603 |
| Journal | BUTTERWORTHS JOURNAL OF INTERNATIONAL BANKING AND FINANCIAL LAW |
| Volume | 36 |
| Issue number | 8 |
| Publication status | Published - 2021 |
Keywords
- CBDC
- Central Bank Digital Currency
- Cryptocurrencies
- Digital Yuan
- Digital Renminbi
- Digital RMB
- Central Bank
- Monetary Policy
- Electronic Money
- M0
