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Zhou Xiaochuan, a former governor of China’s central bank, has urged China to pay close attention to security and prevent abuse as it develops its CBDC.
The People’s Bank of China has been testing its Central Bank Digital Currency (CBDC) or e-CNY and also rolled out a pilot app in January 2022.
Prevent Abuse And Focus On Security
Zhou made the comments during a forum held in Beijing, stating that security has always been a critical issue in finance, especially when it comes to currency. The former governor of China’s central bank, when talking about the security aspect, stated,
“As technology costs continue to decrease and systems become more convenient, the cost of misuse also decreases.”
He also urged the country to prevent abuse, including preventing money laundering and arms trading.
“When I mention preventing abuse, it includes efforts to combat money laundering and arms trading. Many arms trades in military conflicts, as well as drug trades involving substances like fentanyl, are often facilitated using cryptocurrencies and stablecoins for payments, making this an area that requires focused prevention.”
China’s central bank, the People’s Bank of China, has been testing its Central Bank Digital Currency (CBDC) or e-CNY. The bank rolled out a pilot app in January 2022. Since the creation of the digital yuan pilot projects in 2019, the People’s Bank of China has expanded the trial to 26 locations in 17 provincial-level cities and regions. This includes Beijing, Shanghai, Shenzhen, and Suzhou.
Operate e-CNY In A Two-Tier System
Zhou added that China must continue to develop the e-CNY in a two-tier system—currently, the e-CNY functions on a two-tier architecture. The People’s Bank of China is on the first layer for issuance. Meanwhile, commercial institutions such as commercial banks, internet platform companies, and telecommunications operators make up the second layer.
According to Zhou, this design ensures the dynamic evolution
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Author: Amara Khatri
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