According to Yi Yang, China’s DCEP still needs a more comprehensive legal framework.
He added that FinTech companies have an advantage over commercial banks.
Previously, the PBoC had issued a notice in which it tried to revise the current Chinese banking law.
The Governor of the People’s Bank of China (PBoC), Yi Yang, announced that the introduction of a digital currency has gone smoothly in four Chinese cities. He revealed the news during a virtual panel discussion with Agustin Carstens, head of the Bank for International Settlements, and Klaas Knot, president of the Dutch central bank, during the FinTech Week conference in Hong Kong this morning. At the conference, Yang also revealed that the bank has so far processed more than 4 million digital yuan transactions, a total of 2 billion yuan (231.5 million pounds).
According to Yang, China’s Central Bank Digital Currency, also known as DCEP, is still in the early stages of development despite this feat. He added that the coin needs a more comprehensive legal framework. The bank’s governor further stated that the PBoC will initiate further discussions with overseas central banks and regulators focusing on the legal framework for the CBDCs.
Yang added that FinTech companies have numerous advantages over commercial banks in terms of customer base development and risk management. This is because new technologies such as microcredit and mobile payments have helped to improve access to financial services in remote areas.
In addition, the rise of contactless banking, especially during the COVID 19 pandemic, has created challenges for central banks as they have to juggle between managing the convenience of their customers and ensuring their security. Beyond that, Yang believes that central banks face a difficult task when it comes to protecting their customers’ private information.
China’s ongoing efforts to legalize the digital yuan
This news follows a PBoC statement asking for public feedback on the revision of the current central bank law to legalize the digital yuan and prohibit the circulation of digital currencies pegged to the yuan. In the publication, the bank proposed to amend Article 19, Section 3 of the law to include both physical and digital form in the renminbi. In addition, the bank proposed to amend Article 22, Section 3, which states that individuals or legal entities may not produce or issue poken banknotes or digital tokens that replace the circulation of the renminbi in the marketplace.
The Bank further elaborated on this,
“For anyone who violates such a scheme, PBoC will cease such activities and forfeit any proceeds from the manufacture and sale of digital tokens with yuan support and impose a fine of up to five times the amount of such proceeds.