An
official from China’s foreign exchange regulatory body has highlighted the
potential benefits of “programmable features” within a central bank
digital currency (CBDC) to enhance the effectiveness of monetary policy tools.
China is actively developing its own CBDC. However, the adoption remains in its
early stages.
Lu
Lei, the Deputy Administrator of the State Administration of Foreign Exchange,
spoke at a forum and emphasized the programmable capabilities of CBDCs. He
stated that these programmable features could potentially expand the role of
CBDCs beyond M0 currency, traditionally associated with cash in circulation.
This
expansion would encompass M2 currency, which includes various forms of deposits
and savings. These programmable features are settings that can be adjusted,
allowing money to have expiration dates or restrictions for specific uses.
Lu
suggested that the People’s Bank of China might explore these programmable
features to fine-tune interest rates within the CBDC, which could further
contribute to the management of the macroeconomy.
Moreover,
Lu highlighted the potential of CBDCs for cross-border payments, as they can
make transactions safer, more convenient, and inclusive. He noted that last
year, Chinese state-owned banks participated in a trial, in collaboration with
the Bank of International Settlements, focused on cross-border transactions.
As
of the end of June, transactions using China’s CBDC, known as the e-CNY, had
reached 1.8 trillion yuan (approximately S$339 billion). However, it’s
important to note that the e-CNY in circulation represented only 0.16 percent
of China’s M0 money supply, indicating that there is still ample room for
growth and adoption in the CBDC landscape.
The
exploration of programmable features in CBDCs and the growing transaction
volumes using the e-CNY underscore China‘s
commitment to innovation and modernization in its financial sector. As CBDCs
continue to evolve, they hold the potential to reshape monetary policy tools
and cross-border transactions, enhancing the efficiency and inclusivity of
financial systems.
DBS Launches Innovative e-CNY
Payment Solution for Chinese Merchants
Finance Magnates reported earlier that DBS introduced a solution
enabling Chinese merchants to accept payments in e-CNY, China’s central bank digital
currency (CBDC). The initiative marks a significant development in facilitating
e-CNY transactions and enhancing financial services. DBS already executed the
first…
