Background and Implications of China's Central Bank Digital Currency: E-CNY

Abstract

The People’s Republic of China is a leading experimenter in central bank digital currencies (CBDCs). This paper explores the current background, deployment, features, potential impacts, challenges and legal concerns of China’s CBDC, the electronic yuan, or E-CNY. This paper explains the potential significance of what is known and not known about E-CNY with a particular focus on how E-CNY might fit into existing legal and economic systems, both within China and internationally. Section 1 discusses the development of E-CNY, including known technical features, institutional framework, and E-CNY’s intended role in China’s domestic monetary system. Section 2 explores China’s motivations for developing and deploying E-CNY most of which are focused on domestic concerns, though there are important international dynamics as well. Section 3 outlines a number of potential impacts of E-CNY, including domestic impacts on online payment platforms such as Alipay and WeChat Pay and commercial banks as well as impacts on international settlements and countries involved in the Belt and Road Initiative. Section 4 addresses key challenges and concerns around E-CNY, particularly as it pertains to information access and sharing, privacy protections, due process rights, and various technical issues. The last section examines E-CNY in the context of additional legal paradigms, including taxation, antitrust, anti-money laundering, and fraud prevention.

Keywords: Central Bank Digital Currency, China's E-CNY