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China’s central bank is proposing global rules to synchronize the use of CBDCs worldwide and ensuring “a fair supply of digital currencies” for the greater financial stability of the international monetary system.
Asian economic giant and the world’s second-largest economy China has been leading the race for central bank digital currency (CBDC). On Thursday, March 25, during the seminar held by the Bank of International Settlements (BIS), China proposed having global rules for CBDCs.
Mu Changchun, the director-general of the PBoC’s digital currency institute, has put forward this new proposal. Mu has further requested rules for synchronizing CBDCs fund flows thereby helping regulators “monitor the transactions for compliance”. He said that the Chinese central bank has already shared the proposal with other monetary authorities and central banks. As reported by Reuters, the PBoC executive said:
“Interoperability should be enabled between CBDC (central bank digital currency) systems of different jurisdictions and exchange. Information flow and fund flows should be synchronised so as to facilitate regulators to monitor the transactions for compliance.”
The rising popularity of public cryptocurrencies like Bitcoin (BTC) has forced central banks to work on their CBDCs. Besides, countries like China are seeing the CBDC development as a way to internationalize the use of the Yuan while reducing their dependency on the USD.
China has already started conducting pilot tests for its Digital Yuan. The authorities are looking to push further the consumption of the Digital Yuan in the mainstream economy. Mu said that a global rule for CBDCs will ensure a “fair supply of digital currencies” by central banks worldwide. This will lead to the greater financial stability of the international monetary system, he said.
A “digital currency supplied by one central bank should not impede another central bank’s ability to carry out its mandate for monetary and financial stability,” he said.
China’s CBDC Will Co-Exist Along with WeChat Pay and AliPay
As of now, payment services like WeChat Pay and Alipay dominate 98% of China’s mobile payments market. Mu said that one of the reasons that PBoC is developing its own CBDC is to offer 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,” said Mu. “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.
It’s clear that PBoC is making its way to China’s mainstream financial ecosystem. Thus, it is quite possible to see CBDC rollout and usage in other parts of China by the end of this year.