China’s Pursuit of Central Bank Digital Currency: Reasons, Prospects and Implications

Banking and Finance Law Review (2023) Vol 39 No. 3

The Chinese University of Hong Kong Faculty of Law Research Paper No. 2023-28

35 Pages Posted: 17 Oct 2023

See all articles by (Robin) Hui Huang

(Robin) Hui Huang

Chinese University of Hong Kong - Faculty of Law; 华东政法大学(East China University of Political Sicence and Law); University of New South Wales - Faculty of Law

Xiyuan LI

Faculty of Law, The Chinese University of Hong Kong

Date Written: September 9, 2023

Abstract

Amongst major economies, China has been taking a lead in the development of central bank digital currency (CBDC), which has generated widespread interest and impact around the globe. China’s CBDC, commonly known as e-CNY, is designed with several distinctive features, enabling it to compare favorably to other payment methods such as credit cards, mobile payment, unbacked cryptocurrency, and stablecoins. A variety of social, economic, political, and regulatory reasons can be identified to help explain China’s active pursuit of CBDC. However, the prospect of success will be affected by many factors and may vary between the domestic and international markets. This paper argues that the adoption of e-CNY will likely succeed domestically, but may face more challenges in the international markets. The development of e-CNY seems to have created a catfish effect on other major economies in the race for CBDC. It is not fully clear, however, that the CBDC race will be better explained by the first-mover or the late-mover advantage theory. The CBDC project will have both public and private law implications, and several legal issues warrant particular attention in relation to the legal status of CBCD, the role and responsibility of the central bank, legal remedies for losses suffered by CBDC users from cybersecurity issues and operational problems, and the issue of data privacy and protection.

Keywords: Central Bank Digital Currency, e-CNY, Cryptocurrency, payment system, financial inclusion, China

JEL Classification: E42; F33; K22; K33

Suggested Citation

Huang, (Robin) Hui and LI, Xiyuan, China’s Pursuit of Central Bank Digital Currency: Reasons, Prospects and Implications (September 9, 2023). Banking and Finance Law Review (2023) Vol 39 No. 3 , The Chinese University of Hong Kong Faculty of Law Research Paper No. 2023-28, Available at SSRN: https://ssrn.com/abstract=4566641

(Robin) Hui Huang (Contact Author)

Chinese University of Hong Kong - Faculty of Law ( email )

Shatin, New Territories
Hong Kong
852-39431805 (Phone)
852-29942505 (Fax)

HOME PAGE: http://www.law.cuhk.edu.hk/app/people/prof-robin-huang/

华东政法大学(East China University of Political Sicence and Law) ( email )

1575 Wanhangdu Rd.
Changning, Shanghai 200042
China

University of New South Wales - Faculty of Law ( email )

Sydney, New South Wales 2052
Australia
61-2-9385 9649 (Phone)
61-2-9385 1175 (Fax)

Xiyuan LI

Faculty of Law, The Chinese University of Hong Kong ( email )

Hong Kong

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