The PBOC (People’s Bank of China) is reportedly suggesting the introduction of a set of global rules for monitoring and information sharing on CBDCs.
Central banks across the world are looking at developing sovereign digital currencies to modernise their financial systems, ward off the threat from cryptocurrencies like bitcoin, and speed up domestic and international payments. China has been pushing for a faster launch of its CBDC and currently piloting a digital yuan in selected cities.
Speaking at the recent BIS Innovation Summit last Thursday (25 March), the PBOC’s Digital Currency Research Institute director-general Mu Changchun proposed the introduction of a set of international rules for CBDCs, covering how they can be used around the world as well as sensitive issues such as monitoring and information sharing.
According to Mu, the proposal has been shared with other central banks and monetary authorities, suggesting that interoperability between CBDC systems of different jurisdictions should be enabled.
“Information flow and fund flows should be synchronised so as to facilitate regulators to monitor the transactions for compliance,” Mu said. “We also propose a scalable and overseen foreign exchange platform supported by DLT (distributed ledger technology like blockchain) or other technologies.”
Mu also revealed that China’s CBDC would co-exist with technology platforms like Ant Group’s Alipay and Tencent’s WeChat Pay, which currently dominate the online payments market, with a 95 percent market share.
He said one of the key reasons for the PBOC is developing its own CBDC is to provide a back-up to Alipay and WeChat Pay. “If there is something bad happens to them, financially or technically, that could bring negative impact on the financial system’s stability in China,” Mu said. “To provide a backup or redundancy for the retail payment system, the central bank has to step up” and provide digital currency services, he said.
Bloomberg Intelligence estimates the e-yuan could slowly erode the dominance of Alipay and WeChat Pay, grabbing about 9 percent share of the mobile payments markets in 2025.