Digital Yuan Cross Border Payments Are Coming 1677689420

THE DIGITAL YUAN AND
CROSS-BORDER PAYMENTS
China’s Rollout of Its Central Bank Digital Currency
Oriol Caudevilla and Henry M. Kim

Global Impact FinTech Forum and York University
August 2022
A BLOCKCHAIN RESEARCH INSTITUTE LIGHTHOUSE CASE STUDY

Realizing the new promise of the digital economy
In 1994, Don Tapscott coined the phrase, “the digital economy,” with his
book of that title. It discussed how the Web and the Internet of information
would bring important changes in business and society. Today the Internet
of value creates profound new possibilities.
In 2017, Don and Alex Tapscott launched the Blockchain Research Institute
to help realize the new promise of the digital economy. We research the
strategic implications of blockchain technology and produce practical
insights to contribute global blockchain knowledge and help our members
navigate this Web3 revolution.
Our findings, conclusions, and recommendations are initially proprietary to

our members and ultimately released to the public in support of our mission.
To find out more, please visit www.blockchainresearchinstitute.org.
Blockchain Research Institute, 2022
Except where otherwise noted, this work is copyrighted 2022 by the

Blockchain Research Institute and licensed under the Creative Commons
Attribution-NonCommercial-NoDerivatives 4.0 International Public License.
To view a copy of this license, send a letter to Creative Commons, PO
Box 1866, Mountain View, CA 94042, USA, or visit creativecommons.org/
licenses/by-nc-nd/4.0/legalcode.
This document represents the views of its author(s), not necessarily those
of Blockchain Research Institute or the Tapscott Group. This material is for
informational purposes only; it is neither investment advice nor managerial
consulting. Use of this material does not create or constitute any kind of
business relationship with the Blockchain Research Institute or the Tapscott
Group, and neither the Blockchain Research Institute nor the Tapscott Group
is liable for the actions of persons or organizations relying on this material.
Users of this material may copy and distribute it as is under the terms of
this Creative Commons license and cite it in their work. This document may
contain material (photographs, figures, and tables) used with a third party’s
permission or under a different Creative Commons license; and users should
cite those elements separately. Otherwise, we suggest the following citation:
Oriol Caudevilla and Henry M. Kim, “The Digital Yuan and Cross-
Border Payments: China’s Rollout of Its Central Bank Digital
Currency,” foreword by Don Tapscott, Blockchain Research
Institute, 17 Aug. 2022.
To request permission for remixing, transforming, building upon

the material, or distributing any derivative of this material for
any purpose, please contact the Blockchain Research Institute,
www.blockchainresearchinstitute.org/contact-us, and put
“Permission request” in subject line. Thank you for your interest!
Contents
Foreword 3
Case in brief 5
Introduction to the digital yuan 5
Leadership with a sense of urgency 6
The role of blockchain in China’s digital yuan 7
The features of the DCEP system 9
Impact on enterprise in and outside China 10
Timeline and the development process 12
Research phase: 2014–2020 12
Domestic testing began in April 2020 12
Cross-border testing began in February 2021 15
The digital yuan as a tool for cross-border
payments 16
Regional Comprehensive Economic Partnership 17
Joint venture with SWIFT 18
Expansion of the Belt and Road Initiative 18
Blockchain-based service networks 19
Implementation challenges 22
Lack of full convertibility of the yuan 23
Privacy of transactions 23
Effects on monetary policy 24
Environmental impact 25
Closed crypto system 25
Key takeaways 26
About the authors 28
About the Blockchain Research Institute 29
Notes 30
THE DIGITAL YUAN AND CROSS-BORDER PAYMENTS
Foreword
Faced with people’s increased usage of cryptocurrencies for
remittances and investments, central banks around the world
began exploring the effects of crypto assets on the economy and
the potential for central bank digital currencies—digital versions of
fiat money—to serve similar market needs. Krishna Srinivasan, Asia
and Pacific department director of the International Monetary Fund,
recently described the heightened need for authorized digital assets
and appropriate guardrails in the crypto space:
The recent crypto market crash—triggered by the de-pegging

of a large algorithmic stablecoin and exacerbated by the
collapse of overleveraged financial institutions in digital
“The recent crypto market asset banking and trading—highlights the risks created by
crash highlights the risks regulatory shortcomings. As the size of digital assets grow,
without proper regulation, the systemic risks that the sector
created by regulatory poses will increase.1
shortcomings.”
KRISHNA SRINIVASAN Srinivasan pointed to the work of the People’s Bank of China in its
Department Director, Asia deliberate investigation of technology, use cases, and regulation as
and Pacific it developed and rolled out the digital yuan (e-CNY). China was the
International Monetary Fund first major economy to launch a central bank digital currency, and it
did so with great aplomb—during the Beijing 2022 Winter Olympics.
While the digital yuan is still in its testing stage, it gives us a sense
of its potential in payments and cross-border trade, including its
role as a currency standard for the Belt and Road Initiative as well
as an alternative to the Society for Worldwide Interbank Financial
Telecommunication messaging network.
The digital yuan’s debut startled US lawmakers enough to act against

its use in the United States, specifically by proposing a law that
would ban app stores within US jurisdiction from accepting e-CNY as
payment or distributing any mobile application that facilitates e-CNY
transactions.2 The bill awaits further action in the Senate committee
on commerce, science, and transportation.3
Meanwhile, the disappearance of depositors’ hard-earned savings

from banks in Anhui and Henan Provinces—and the central
government’s tepid response—has “exposed more systemic issues
in China’s financial system, including potential corruption and weak
regulatory oversight at rural banks,” according to the New York
Times.4 Perhaps the digital yuan will help the Communist Party
3 © 2022 BLOCKCHAIN RESEARCH INSTITUTE

to root out the alleged gangsters and grifters in China’s banking

system? To rebuild trust, perhaps the PBOC will offer interest on
deposits in certain provinces to those who no longer trust their local
bankers?5 This case study shines light on these topics.
We are grateful to Dr. Oriol Caudevilla and Dr. Henry Kim of York
University for conducting this in-depth study. Dr. Caudevilla has
impressive credentials with respect to online currencies, financial
This study pulls together innovation, and the Asian economy in general: he has acted as
multiple strands of research, a strategic advisor to innovative organizations in Hong Kong,
to weave one of the Singapore, and India. He has also taught university courses in Spain,
richest tapestries yet on Hong Kong, and Japan and placed articles in prestigious publications.
Dr. Kim is one of the leading blockchain academics in Canada and
the systematic research, leads the Digital Currencies Research Project at York University. For
development, and unveiling this research, Dr. Caudevilla interviewed such experts as Shanghai-
of digital fiat money. based fintech expert Richard Turrin, Pindar Wong of VeriFi (Hong
Kong) Limited, Charles d’Haussy of ConsenSys, and Yifan He of Red
Date Tech, the start-up behind China’s blockchain-based service
network. This study pulls together multiple strands of research, to
weave one of the richest tapestries yet on the systematic research,
development, and unveiling of digital fiat money.
DON TAPSCOTT
Co-founder and Executive Chairman
Blockchain Research Institute
Multiple Uniform Red Buildings Under Blue Sky by Shuaizhi Tian, 2020, used
under Pexels license. Cropped to fit.

Case in brief
» Monetary experts have referred to central bank digital
currencies (CBDCs) as “the future of payments” or even “the
future of money,” and not without reason.6 China’s launch of
its digital yuan begins a new era in payments, making China
the first major economy to deploy its own CBDC. After six
In addition to the domestic years of research and development, the Chinese government
advantages of a digital announced its testing of the digital yuan (called e-CNY) within
yuan, China has laid the its digital currency electronic payment (DCEP) system.7
groundwork to launch the » In addition to the domestic advantages of a digital yuan,
digital yuan internationally. China has laid the groundwork to launch the digital yuan
internationally, by signing a Regional Comprehensive
Economic Partnership (RCEP) agreement, forming a joint
venture between People’s Bank of China (PBOC) and the
Society for Worldwide Interbank Financial Telecommunication
(SWIFT), and testing e-CNY in Hong Kong.
» The domestic and cross-border tests proved so successful that

the PBOC released digital yuan wallet applications for Android
and iOS in early January 2022. On the day of the opening
ceremony of the Beijing 2022 Winter Olympics, more people
used China’s DCEP than Visa for digital transactions there.8
» Western policymakers have expressed concerns over China’s

aspirations to internationalize the renminbi by expanding
its DCEP, potentially allowing China’s security agencies to
monitor the financial activity of foreign visitors, companies,
or governments doing business in China or in its Belt and
Road Initiative, or to bypass sanctions against some of the
initiative’s members.9 This case study looks at how China
might leverage the e-CNY to increase its influence in the
global economy.
Introduction to the digital yuan

China’s launch of its digital
yuan started a new era in China’s launch of its digital yuan started a new era in payments,
payments, making China making China the first major economy to deploy its own CBDC. A
the first major economy to retail CBDC is a new form of fiat or central bank money available
to the public, acceptable as a means of payment, legal tender, and
deploy its own central bank
safe store of value for citizens, businesses, government agencies,
digital currency. and others. Developed and launched on an open infrastructure, a
CBDC could enable cheap, secure, and real-time transfers of value
without a bank account and foster competition, innovation, and global
participation.
China is not alone in its exploration of digital currencies. In 2020, the

Bank of International Settlement surveyed its 179 members on the
topic of CBDCs. Of the 65 respondents, 86 percent had explored a
CBDC, eight had pilot projects underway, and the Bahamas was in

the process of launching its digital sand dollar.10 In a follow-up survey

in 2021, the number had grown to 90 percent of the 81 respondents,
with Nigeria’s launching its eNaira and the Eastern Caribbean Central
Bank’s introducing its DCash.11
There are many motivations behind these efforts: CBDCs can replace
physical notes, promote financial inclusion, deter or detect financial
crime, and offer a government-backed alternative to cryptocurrencies
A primary rationale for and stablecoins; and governments can use them to adapt more
the Chinese government’s quickly to unexpected changes in technology or consumer behavior
launching its CBDC is and improve financial stability as a monetary policy tool (e.g., to
to slowly challenge the reduce the lower bound on interest rates).
dominance of the US dollar
China wants its digital yuan to help achieve those goals.12 However,
in international trade and a primary rationale for the Chinese government’s launching its CBDC
finance. is promoting the use of the yuan for cross-border payments, thus
converting some of the US dollar-denominated international trade
transactions into renminbi-denominated ones, and slowly challenging
the dominance of the US dollar in international trade and finance.
Over the last five years, China has made strategic moves
that underscore the importance of expanding the digital yuan
internationally. First, it continued to support investment in its
Belt and Road Initiative.13 Second, it signed the RCEP free trade
agreement in November 2020.14 Third, the PBOC signed a joint
venture with SWIFT in February 2021.15 Fourth, also in February,
it signed a memorandum of understanding with the Hong Kong
Monetary Authority (HKMA), the Bank of Thailand, and the Central
Bank of the United Arab Emirates to collaborate on building and
testing a CBDC for cross-border trading.16
Leadership with a sense of urgency

Chinese technology enthusiasts were among the early adopters of
bitcoin in 2009, at one point accounting for nearly three quarters of
the total processing power of the Bitcoin network, with one of the
“The only way China could first cryptocurrency exchanges launching in 2011, and the country’s
manage 1.4 billion people largest search engine accepting bitcoin for website security services
in 2013.17
and provide them with
services, banking, different
“If we go back to the 2012 five-year plan, we see a realization by the
government services … was government that the only way China could manage 1.4 billion people
to go digital.” and provide them with services, banking, different government
services … was to go digital,” said Richard Turrin, an award-winning
RICHARD TURRIN
executive and the author of the international best-selling books,
Author
Cashless: China’s Digital Currency Revolution and Innovation Lab
Cashless
Excellence.18 Turrin headed fintech teams at IBM after a twenty-year
career in investment banking. “The best analogy is that the Chinese
did what the United States did in the 1960s with the Space Race,”
he said. “We need more science and technology. Tech is the critical
component to society and to our growth. Thanks to this push, digital
became a critical cornerstone of China´s society and of its GDP
[gross domestic product] growth.”19

In 2014, the Chinese government began its blockchain research in

earnest, with the PBOC responsible for exploring digital currencies.20
In July 2021, the bank’s working group published its first and
only official report on the digital yuan, “Progress of Research and
Development of e-CNY in China.” The report, albeit short, walked
through the government’s research and development (R&D) process
and took care to distinguish the e-CNY from cryptocurrencies and
stablecoins.
In 2014, the Chinese
government began its Specifically, the report defined e-CNY as the digital version of retail
blockchain research in fiat currency with a two-tier operating model: in the first tier, the
earnest, with the People’s PBOC issues and controls its supply and doles it out to authorized
entities such as commercial banks, telecom operators, and payment
Bank of China responsible service providers; in the second tier, only those authorized entities
for exploring digital may distribute it and activate its use in the economy.21 “The e-CNY
currencies. will likely bring substantial changes to China’s digital payment
sector,” said Yi Xiong, Deutsche Bank’s chief economist in Asia. “It
offers an entry point for China’s big banks to break into a business
segment that is currently dominated by big tech firms.”22
The e-CNY has all the basic functions of money as a unit of account,
a medium of exchange, and a store of value, though it is not an
interest-bearing instrument per se. It has legal tender status. The
PBOC views e-CNY as coexisting with physical RMB, an official
new interoperable form of payment, and a substitute for cash in
circulation (that is, for M0, the monetary base, the total amount
of currency in public hands or in commercial bank deposits held
in PBOC’s reserves).23 Just as the PBOC charges no fees for using
physical renminbi in payments and exchanges, it will charge no fees
for retail or wholesale use of e-CNY.24
The role of blockchain in China’s digital yuan

The PBOC chose a conventional approach to the CBDC design
because of the immaturity, performance, and scalability challenges
that blockchain presented. To understand the design of the DCEP
system, we interviewed Charles d’Haussy, managing director of
ConsenSys Asia-Pacific. Among his responsibilities, d’Haussy leads
The People’s Bank of China ConsenSys’ projects on CBDCs with HKMA and Bank of Thailand. He
chose a conventional described the basic architecture:
approach to the CBDC
To the best of our knowledge, the digital yuan has been
design because of the designed in a way that can be implemented in a centralized
immaturity, performance, database or decentralized databases like blockchain. The
and scalability challenges architecture of the e-yuan is around accounts and tokens.
that blockchain presented. The e-yuan is a token moving from one account to other, very
similar to what we implemented with Ethereum technology,
which is what we focus on at ConsenSys.25
But the PBOC did not totally rule out distributed ledger technologies.
In a September 2021 speech, Di Gang, deputy director of its Digital
Currency Institute, said that the PBOC was exploring the use of
blockchain in three areas:26

Red Colored Seats in an Arena by Magda Ehlers, 2019, used under Pexels license.
Cropped to fit.
» In the core layer of Project Inthanon-LionRock prototype

for multiple CBDC (mCBDC) cross-border trials (mBridge).
Developed by ConsenSys on Hyperledger Besu, a
permissioned Enterprise Ethereum blockchain, this layer
consists of smart contract logic and blockchain nodes that
support programmability, validate blocks, and maintain CBDC
balances.27
» In the digital yuan issuance layer, as in the mCBDC project.

Here tamper-resistant distributed ledgers could help with
reconciliation, though Di Gang said that blockchain was not
yet ready for high concurrency and high performance.28
» In trade finance, as in the proof of concept (POC) linking Hong

“Given the progress Kong Interbank Clearing’s blockchain-based eTradeConnect
of regulated and non- and the PBOC’s trade finance platform.29 Here blockchain in
regulated stablecoins, all of combination with artificial intelligence and robotic process
automation could minimize paper-based and people-driven
which sit on blockchain, it processes, lower administrative costs, and extend services to
will be difficult for CBDCs to small and medium-sized enterprises that typically use open
be relevant and competitive account transactions, where sellers ship and deliver goods
if they are not deployed on before buyers’ payments are due.30
blockchain.”
Mu Changchun, director-general of the PBOC’s Digital Currency
CHARLES D’HAUSSY Institute, said that the account system was the most valuable
Co-author, Block Kong asset of banks.31 Focusing on the concepts of accounts and tokens,
Former Head of Fintech, d’Haussy said that we can implement accounts in a centralized or
Invest Hong Kong a decentralized manner; the tokens represent money (i.e., store of
value): “For mainland China’s domestic market, potentially the e-yuan
will be available on both infrastructures, depending on how the
payments provider and bank want to implement the technology. For
the international digital yuan, we still see some experimentation.”32
We also spoke with Pindar Wong, chairman of VeriFi (Hong Kong)

Limited, a discrete Internet financial infrastructure consultancy.

Wong is an Internet pioneer: he co-founded the first licensed

Internet service provider in Hong Kong in 1993, and he leads the Belt
and Road Blockchain Consortium.33 Wong told us that, to the best of
his knowledge, blockchain will play no role in cross-border payments.
He said that blockchain might have a role in the payment rail in terms
of ascertaining changes of legal title in trade finance.34
Whether China will integrate blockchain technologies into its digital

Whether China will yuan system and to what extent remains unclear. Said d’Haussy
integrate blockchain of ConsenSys, “Given the progress of regulated and non-regulated
technologies into its digital stablecoins, all of which sit on blockchain, it will be difficult for
yuan system and to what CBDCs to be relevant and competitive if they are not deployed on
blockchain.”35
extent remains unclear.
The features of the DCEP system

The digital yuan incorporates a variety of elements. For security,
it combines a digital certificate system, digital signatures, and
encrypted storage to reduce the feasibility of counterfeiting,
transaction falsification or reversibility, and double spending,
which refers to the risk—particularly when parties exchange digital
currency—that one party could concurrently send a single unit of
currency to two different accounts.36 The PBOC has not detailed how
its technology solves the double-spending problem, but it claims
that its “multi-layer security system” will manage such risks and
guarantee the safety of the e-CNY life cycle, from password and data
security to privacy of financial information and business continuity.37
For financial inclusion, the system requires no bank account or

Internet connectivity: users can obtain and use “smartphone-free
hardware wallets” with security chips and based on integrated circuit
cards without a bank account; and they can make “dual offline
payments,” meaning that the payer can transfer funds to the payee,
likely through near-field communications technology.38 Smartphone
“Smart contracts are users can download the free software wallet app, but it requires
software modeled on linking to one of the “authorized operators” (Figure 1, next page).
contractual relationships The PBOC uses the phrase “loosely coupled with bank accounts,” as if
that facilitate negotiations specifying a bank account is optional.
and incentivize
performance via control Regarding programmability, the PBOC references the use of smart
contracts, but not in terms of their inventor Nick Szabo’s definition,
of assets.”
“an application that runs in a distributed and trust-minimized manner
NICK SZABO on a blockchain,” that is, running “on a secure consensus protocol
Author across a network of computers rather than on an individual remote
“Winning Strategies for Smart computer or centralized server” and running without reliance on a
Contracts” particular person or organization to secure it.39 Payments in e-CNY
may be programmable in the way that payments with credit cards
are programmable, for example, through application programming
interfaces.40
Regarding privacy, users of integrated circuit cards will be relatively

anonymous—no numbers attached to their identities. Also, neither
the central bank, commercial banks, nor payment service providers
can access the personal information linked to account telephone

numbers, under China’s Personal Information Protection Law that

went into effect in December 2021.41 The only transactions accessible
to the central bank are those between the banks and payment
services. Separately, the digital yuan aims to enhance transaction
privacy, making it harder for private firms to track a user’s activities
between separate merchants. Finally, all wallets have a subwallet
function (which will use tokenization and encryption) in which each
online retail store can have a separate wallet to avoid linking a
The digital yuan aims to person across retail outlets.42
enhance transaction privacy,
making it harder for private Impact on enterprise in and outside China
firms to track a user’s
activities between separate DCEP has several potential advantages. It gives the Chinese
government another soft-power tool. The PBOC can at least minimize
merchants.
its shadow banking system and reduce printing and minting costs.
For commercial banks, DCEP will facilitate more money transactions
with lower to no costs. For the public, DCEP will save indirect
transaction fees for interbank transfers. For monetary policy, the
PBOC can track the flow of money through its economy and make
better planning decisions under the auspices of the State Council.
Figure 1: Digital yuan wallet screenshots
Open a wallet Check balance Make payment Receive yuan
Four screenshots of digital yuan wallet interface © 2022 Richard Turrin. Used with rights holder’s permission. All rights
reserved. See also “Digital Yuan e-CNY App Review,” RichTurrin.com, n.d. richturrin.com/digital-yuan-e-cny-app-review,
accessed 5 Aug. 2022.

The digital yuan will be an effective tool when promoting financial

inclusion, since CBDCs can address the needs of unbanked and
underbanked people. According to the World Bank, 1.4 billion people
have no bank account because they have insufficient funds or
CBDCs can potentially insufficient documentation to open an account, or they live too far
open up what the late from a financial institution to benefit from its services.43 Policymakers
CK Prahalad called the struggle to deliver affordable, safe, and accessible financial services
to the global unbanked. CBDCs can help in that area. They can
“fortune at the bottom of
potentially open up what the late CK Prahalad called the “fortune at
the pyramid” for businesses the bottom of the pyramid” for businesses that already sell in low-
that already sell in low-cost cost markets.44
markets.
If the yuan achieves international reserve status, then any
business operating in China or conducting operations with Chinese
companies will want to prepare for the digital yuan. Within China,
the government will encourage or even require companies in certain
cases to use DCEP. While merchants in China can refuse to accept
Alipay or WeChat Pay, they must accept payments using China´s
digital yuan.45
Pindar Wong of VeriFi (Hong Kong) Ltd. said that how companies
should register to transact is still unclear. For companies in China,
Wong expected no problems: nearly all companies in China’s
domestic market will likely have accounts in e-CNY for convenience
and taxes.
Outside China, the situation may be different. In the report, “China´s

Digital RMB: Is Your Business Ready?” experts at King & Wood
Mallesons stated:
Cross-border payments using DCEP can give rise to many

systems, interoperability, data, legal and regulatory
implications, especially if the recipient of DCEP is based in a
jurisdiction that still uses physical currency, which is highly
likely to be the case because China is on track to become the
first major economy to roll out a CBDC at the retail level.46
Furthermore, they cited multiple policy “unknowns” in relation to

For companies in DCEP availability outside of mainland China, including:
China, Wong expected
no problems: nearly all » Who can access a wallet outside of mainland China?
companies in China’s
domestic market will likely » What verification information and documents will China
require?
have accounts in e-CNY for
convenience and taxes. » Which institutions can offer a digital wallet, and how?
» Will China require any other nexus to mainland China, such as
an onshore location or obligation?
» CNY is renminbi used on mainland China only, whereas

CNH is renminbi traded outside China.47 Will there be a CNH
equivalent, that is, an offshore version of DCEP?
The authors of that report (Olsson, Fei, McCormack, Yu, and

Wang) expected the Beijing 2022 Winter Olympics to be a litmus

test of how those traveling into China or otherwise engaging with

Chinese businesses—as well as their supporting banks and payment
providers—might use DCEP, and whether broader cross-border use
cases will emerge beyond this event.
Timeline and the development process

Research phase: 2014–2020
The Chinese government’s research commenced in 2014. It set up
a digital fiat currency research group to study the opportunity; the
group conducted in-depth studies to inform the issuance framework
and circulation environment, the choice of technologies including
blockchain, and international efforts on CBDCs.
In 2016, the PBOC set up its Digital Currency Institute (数字货币研究所)

and developed a prototype of the e-CNY. Its designers proposed
basic features, including the two-tier operational system. One
tier consists of select commercial banks that expedite individuals’
exchange of e-CNY with cash or bank deposits. The PBOC facilitates
the other tier, controlling supply and overseeing payments among
banks.
In 2017, upon the approval of the State Council, the PBOC began to
work with commercial institutions in developing and testing digital
fiat currency. Under this framework and approved by the State
Council, the PBOC started the e-CNY R&D project at the end of 2017.
It selected large commercial banks, telecom operators, and Internet
companies with high rankings in asset size and market share and
strengths in technology development to participate.
From 2018 to 2020, the PBOC and participating institutions developed

For participants, the and improved e-CNY apps through three phases: development and
testing, internal verification, and a managed external pilot.
People’s Bank of China
selected large commercial
banks, telecom operators, Domestic testing began in April 2020
and Internet companies After six years of work, in April 2020, the government announced
with high rankings in asset the launch of tests of the digital yuan and its DCEP, taking a gradual
size and market share and approach. China started by testing its DCEP with very few citizens
strengths in technology in four major cities (Suzhou, Chengdu, Xiong’an, and Shenzhen,
development. sometimes called “China’s Silicon Valley”), notwithstanding the
COVID-19 pandemic.48 It also gave e-CNY to 5,000 healthcare
workers.49
On 14 August 2020, China took a step further: its Ministry of

Commerce announced a pilot in several new areas: Northern China,
encompassing Beijing; Tianjin and Hebei Province; the city cluster in
the Yangtze River Delta Region including Shanghai; and the Greater
Bay Area (GBA), including Macau and Hong Kong.50

The government designed these pilots to test system stability,

functionality, the controllability of risks, convenience (including
payment methods such as QR code and tap-and-go), and the
relevance of the use cases (e.g., payments for catering, tourism,
transportation, utility fees, and taxes).51
Starting in November 2020, Shanghai, Hainan, Changsha, Xi’an,

Qingdao, and Dalian joined in the pilot. The project team selected
These pilots tested system locations according to national development strategies, coordinated
stability, functionality, the regional development strategies, and city-specific industrial and
controllability of risks, economic features. The pilot program expanded to the Yangtze River
Delta, the Pearl River Delta, the Beijing-Tianjin-Hebei region, and
convenience, and the
China’s central, western, northeastern, and northwestern regions.
relevance of the use cases. Some pilot tests involved real users in different scenarios, and others
were large-scale tests of transfers in batches.
As of 30 June 2021, users had applied e-CNY in over 1.32 million

scenarios, covering utility payment, catering service, transportation,
Table 1: DCEP trials across China

Date Location Total yuan Number of red Participating
envelopes businesses
12–20 Shenzhen
¥10 million 50,000 ~3,390
Oct. 2020 (Luohu district)
11–27
Suzhou ¥20 million 100,000 ~10,000
Dec. 2020
7–17 Shenzhen
¥20 million 100,000 JD.com
Jan. 2021 (Futian district)
1–9 Shenzhen
¥20 million 100,000 10,000+
Feb. 2021 (Longhua district)
11–17 Beijing
¥10 million 50,000 3,500+
Feb. 2021 (Wangfujing)
Select stores,
Feb. 2021 Chengdu ¥40.2 million N/A
restaurants, JD.com
10–26
Suzhou ¥30 million 150,000 N/A
Feb. 2021
3–19 11,000+
Chengdu ¥40 million 200,000
March 2021 JD.com
June 2021 Beijing ¥40 million 200,000 N/A
May 2022 Shenzhen ¥30 million ~285,000 Meituan
Adapted from various sources including Yolanda Huang, “China’s DCEP Project Launches Biggest Digital Yuan Test Yet,” Forkast
News, Forkast Ltd., 3 March 2021. forkast.news/china-dcep-digital-yuan-pros-cons, accessed 5 Aug. 2022.

shopping, and government services. Individuals and organizations

had opened more than 20.87 million personal wallets and over 3.51
million corporate wallets, with transaction volume totaling 70.75
million and transaction value approximating ¥34.5 billion.52 Table 1 on
the previous page shows some of the massive e-CNY giveaways and
lotteries as part of retail testing.53
In China, red envelopes (hongbao) often contain financial gifts

As of 30 June 2021, presented at social gatherings such as weddings or on holidays such
users had applied e-CNY as the Lunar New Year. The Chinese government used digital red
in over 1.32 million envelopes to distribute e-CNY for its mass retail tests.
scenarios, covering utility
payment, catering service, China launched its digital yuan wallet app on 4 January 2022. The
digital currency works through a mobile app available on Android and
transportation, shopping, Apple app stores where permissible. The app is still in a development
and government services. phase and restricted to select users such as domestic banks as China
plans a nationwide rollout.54
In February 2022, China offered the digital yuan at the Beijing Winter
Olympics to test its overseas appeal, marking the digital yuan´s first
actual international test run. On the day of the opening ceremony of
the games, users conducted more transactions with China’s CBDC
than through Visa.55 According to one source, users made two million
yuan ($315,761) or more of payments a day in the e-CNY pilot in
Beijing.56 It was the first time that overseas visitors were free to use
China’s digital currency via smartphones and wearable devices such
as badges, gloves, and uniforms with payment functions.57
In February 2022, China

offered the digital yuan at
Beijing Winter Olympics to
test its overseas appeal,
marking the digital yuan´s
first actual international
test run.
Man Wearing White Button Up Shirt Holding an Envelope by Huynh Van, 2020,
used under Pexels license. Cropped to fit.

To showcase its technology, the government tested scenarios such

as “unmanned vending carts, automatic vending machines, and
unattended supermarkets” on the premises of the 2022 Paralympic
Winter Games in March 2022.58 Most users participating in the pilot
tests agreed that e-CNY helped improve payment efficiency and
reduce costs. The public, small and micro vendors, and enterprises
acknowledged the convenience and inclusiveness of e-CNY. That
said, two Nikkei Asia journalists from Japan reported trying to
Use cases tested download the e-CNY wallet apps but discovered that it loaded only on
smartphones using an authorized Chinese mobile service. So, they
Payments purchased prepaid e-CNY cards that worked with special point-of-sale
» Employee wages devices.59
» Retail sales
» Tariffs and taxes In April, the PBOC expanded testing to Tianjin, Chongqing,
» Utilities Guangzhou, Fuzhou, Xiamen, and the cities—Hangzhou, Huzhou,
Ningbo, Shaoxing, Jinhua, and Wenzhou—related to the 19th Asian
Games.60 By the end of May, 4.57 million retail sites and businesses
Services accepted e-CNY, with 264 million transactions totaling ¥83 billion
» Catering (~$12.3 billion).61
» Education
» Government In June, China UnionPay Merchant Services, China Construction
» Medical Bank, and the Sunshine Insurance Group collaborated to sell their
» Tourism and travel first automobile insurance policy in e-CNY; a freight agency in
» Transportation Liaoning province paid its tariffs in e-CNY; and the China Minsheng
» Wealth management Banking Corporation allowed its corporate clients to pay their
employee wages in e-CNY.62 The China Construction Bank also
began accepting e-CNY from customers who wanted to buy wealth
Financial services management products including insurance and investment funds.63
» Agricultural finance The PBOC promoted the adoption of the digital yuan for agricultural
» Automobile insurance finance and carbon mitigation.64
» Carbon mitigation
» Insurance In July 2022, the PBOC summarized its efforts, with testing underway
» Investment funds in 23 regions and 15 provinces and cities, with online and offline use
» Loans cases such as paying taxes, getting loans, and buying electricity,
medical care, education, and travel services.65
Digital wallets
» Wallet apps Cross-border testing began in February 2021
» Hardware wallets (cards) In the first phase of Project Inthanon-LionRock, launched in 2018, the
» Wearable hardware enterprise technology firm R3 used the Corda distributed ledger to
wallets
build a platform for the first POC, “a cross-border corridor network”
that connected the blockchain-based local payment networks of
Hong Kong and Thailand.66 Parties in each network transferred funds
and completed foreign exchange (FX) transactions peer to peer,
thereby reducing settlement layers.67 The design leveraged smart
contracts, bundling funds transfers and FX transactions together and
automating compliance to local regulations.68
In the second phase, the blockchain technology company ConsenSys

used the Hyperledger Besu permissioned blockchain framework
to build a prototype for each central bank to manage and monitor
the balance and flow of its own CBDC and use smart contracts to
program certain transactions and automate specific compliance
functions.69

In February 2021, the PBOC, the Central Bank of the United Arab
Emirates, and the Bank of International Settlements joined the
project, now dubbed the mCBDC Bridge project (mBridge). In the
third phase, the parties began trying out design choices, weighing
technology trade-offs, and exploring additional functionalities. They
also iterated on the prototype, explored connectivity to the four
central banking systems, and tested use cases such as international
trade finance.70
In early December 2021, Mu Changchun of the PBOC’s Digital

Currency Institute, reported that the PBOC and HKMA had
successfully tested the topping up, transferring, and paying of e-CNY
through digital wallets in collaboration with Hong Kong banks and
merchants.71 In collaboration with HKMA, the Bank of Thailand, and
the Central Bank of the United Arab Emirates, the PBOC succeeded
in creating a shared platform for completing international transfers,
FX operations, and settlement of multiple CBDCs in seconds; and
the four were in the next phase of testing cross-border transactions
using CBDCs.72
Mu said, “In the future, when mainland tourists use the digital
The Hong Kong Monetary
yuan to shop in Hong Kong, the foreign currency exchange will
Authority, the Bank of be completed between two wallets, and local merchants will
Thailand, the Central receive money in Hong Kong dollars, so there will be no currency
Bank of the United Arab substitution.”73
Emirates, and the People’s
Bank of China succeeded in
creating a shared platform
for completing international
transfers, foreign exchange
The digital yuan as a tool for cross-border
operations, and settlement payments
of multiple CBDCs in
seconds. China has made some relevant movements in this area these last
few months, movements suggesting that expanding the digital
yuan internationally is an important goal. The tests in Hong Kong
(and Macau) were especially important for China. Until then, China
had focused on domestic use cases to facilitate consumer retail
payments. However, the testing of the digital yuan in Hong Kong, one
of the major financial hubs in the world, was relevant to enhancing
the yuan as a payments currency in the global financial system.
Eddie Yue, chief executive of the HKMA, the city’s de facto

central bank, said that the e-CNY testing with the Bank for
International Settlements marked an important step for Hong
Kong in strengthening its role as an offshore yuan trading center.74
He said that HKMA was “exploring the feasibility of connecting
eTradeConnect, [commercial data interchange], and mBridge to
strengthen the synergy between the three and further digitalize the
cross-border trade process.”75 There are three components to this
effort:

First, eTradeConnect will provide the infrastructure for

digitalizing trade finance, as well as support cross-boundary
trade between Hong Kong and Mainland China. Second,
CDI will link up various digital islands to form a seamless
data ecosystem. Finally, mBridge will expedite cross-border
payments while reducing costs.76
However, HKMA does not aim to replace the Hong Kong dollar with
Hong Kong Monetary the digital yuan—it is exploring its own electronic form of central
Authority does not aim to bank money, the e-HKD.77 Rather, the tests in Hong Kong and Macau
replace the Hong Kong aimed at cross-border transactions. Since Hong Kong is one of the
dollar with the digital most open and global cities in the Bay Area, China can leverage it to
promote its digital currency on a global stage.
yuan—it is exploring its own
electronic form of central In June 2022, the Suzhou branch of the Bank of China (not the PBOC)
bank money. loaned three million digital yuan to an e-commerce merchant outside
China; the merchant used ¥1 million of it to pay for railway freight
charges.78
Regional Comprehensive Economic Partnership

One of the world’s largest free-trade deals in history, the RCEP was
signed on 15 November 2020, after eight years of negotiations, and
took effect on 1 January 2022.79 It is composed of 15 countries—all
10 members of the Association of Southeast Asian Nations (ASEAN),
namely, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar,
Philippines, Singapore, Thailand, and Vietnam—plus China, Japan,
South Korea, Australia, and New Zealand, that will create a free trade
area encompassing 28 percent of the global economy, 30 percent of
the global population, and reaching 2.2 billion consumers.80
By one estimate, “the deal could increase the global national income
by $186 billion annually by 2030 and add 0.2 percent to the economy
of its member states.”81 Its members aim to lower tariffs, reduce
protectionism, and boost investment. Furthermore, it will allow
for one set of rules of origin to qualify for tariff reductions with
other RCEP members; a common set of regulations mean fewer
procedures, therefore, easier movement of goods.82
The Regional
Aside from the economic size of the deal, RCEP marks the first time
Comprehensive Economic
China, Japan, and South Korea have been in a single free trade
Partnership aims to agreement, and it marks the first time China enters a nonbilateral
lower tariffs, reduce free trade agreement of this scale. From China’s perspective, RCEP
protectionism, and boost aligns with China’s “dual circulation” vision, refocusing on domestic
investment among its 15 demand while cultivating trade and foreign investment. ASEAN
members. remains China’s largest trading partner, “accounting for 14.6 percent
of its total foreign trade in the first four months of 2022,” followed by
the European Union and the United States.83
The COVID-19 pandemic confronted the world with unprecedented

challenges. The signing of the RCEP agreement was a step toward
economic recovery, inclusive development, job creation, and
supply chain resilience in the region. The free trade area may
be a big market for China´s digital yuan (alongside the Belt and

Road Initiative), facilitating its cross-border adoption. Other Asian

countries—Thailand, Cambodia, Vietnam, Philippines as well as
Korea and Japan—have shown interest in developing and potentially
deploying their own CBDCs. Both the Bank of Korea and the Bank of
Japan started their tests in early 2021. RCEP may pave the way for
their expansion throughout Asia as well.
Joint venture with SWIFT

In February 2021, the PBOC announced that its new joint venture
with SWIFT and several Chinese institutions will offer localized
financial services to make cross-border transactions more stable
and secure. By one account, it was more SWIFT’s attempt to remain
relevant there for multiple reasons:
» China reported that its home-grown cross-border “netting

engine,” the Cross-border Interbank Payment System (CIPS),
grew in transaction volume by 50 percent and in transaction
value by 75 percent in 2021.84
» The PBOC reported that “some Chinese medium and small-

sized banks have reported unstable connectivity to the SWIFT
network, affecting their cross-border transactions.”85
» SWIFT project manager Aidan McGrattan said that SWIFT

formed the joint venture to secure licenses for continued
operations in China and adherence to Chinese regulations.86
» According to China Banking News, “Analysts have speculated

that digital renminbi could sideline or replace established
payments systems such as Alipay, Tencent Pay, and SWIFT.”87
As China’s financial industry continues to open up to the outside

world, more domestic institutions use SWIFT’s global financial
network and information services. The new entity will operate
financial messaging services through a local network and set up
a localized data warehouse to monitor and analyze cross-border
payment messaging, the PBOC added.88 The joint venture involves
China’s joint venture with CIPS as well as the Payment and Clearing Association of China, a
SWIFT will operate financial self-regulatory association for the payments industry, and the PBOC’s
Digital Currency Institute.
messaging services through
a local network and set up
a localized data warehouse Expansion of the Belt and Road Initiative
to monitor and analyze In 2013, President Xi Jinping introduced his vision for an economic
cross-border payment belt over land with a maritime parallel in the spirit of the Silk
messaging. Road, a symbol of East–West cooperation.89 The Belt and Road
Initiative became a key program for China and a potential means of
internationalizing the digital yuan.90
According to the official outline, the Belt and Road is a global

initiative but by its nature of building on the historic Silk Road puts a
major focus on countries in Asia, Eastern Africa, Eastern Europe, and
the Middle East, a region mainly composed of emerging markets.91

According to the Belt and Road Portal, currently 140 countries are
taking part, representing more than a third of the world’s GDP
(35.2%) and nearly two-thirds of the world’s population (58.9%).92
Given the connections that the Belt and Road will create among
participating countries, especially with China, we expect the initiative
to play some role in internationalizing the digital yuan. Yifan He,
founder and CEO of Red Date Technology, told us China is currently
China is currently focusing on expanding its blockchain-based service network, a
focusing on expanding its “blockchain public network system” that aggregates technology
blockchain-based service standards and frameworks in one place, to Belt and Road countries.
network to Belt and Road This may help in gauging receptivity to using the digital yuan across
the Belt and Road area.93 To us, the area seems the best possible test
countries. bed for internationalizing e-CNY. (See Figure 2 below.)
Blockchain-based service networks

In 2019, Chinese state-owned telecom giant China Mobile, UnionPay,
and IT start-up Red Date Technology launched a larger scale
Figure 2: Countries of the Belt and Road Initiative
Exploring CBDCs
Not exploring CBDCs
Created with MapChart. Sources: “Central Bank Digital Currency Tracker,” Atlantic Council, www.atlanticcouncil.org/
cbdctracker; and “Countries of the Belt and Road Initiative,” Green Finance and Development Center, greenfdc.org/countries-
of-the-belt-and-road-initiative-bri, as of 8 June 2022.

blockchain-based project, known as a blockchain-based service

network (BSN). Within this system are public city nodes (PCNs),
described not as nodes on a blockchain per se but as digital
“resource pools … of computing power, storage, and bandwidth.”94
Developers can use BSN’s cross-cloud, cross-portal, and cross-
framework global public infrastructure network to deploy and operate
all types of blockchain distributed applications (dapps) such as smart
contracts. When functioning properly, city nodes can intelligently and
When functioning automatically allocate node capacity for high-frequency apps; and
properly, city nodes can multiple low-frequency apps can share a single node.
automatically allocate node
capacity for high-frequency The BSN is the first global infrastructure for managing the legal
and technical hazards of international trade.95 The blockchain-
apps; and multiple low- based transnational trade network (BTTN, also by Red Date Tech)
frequency apps can share a intends to address this issue by connecting trade partners on a
single node. private network of “data highways” (called business chains, including
both permissioned and permissionless chains). They need only to
connect to the network. Firms can share data between jurisdictions
(i.e., multilateral transfer of value) by plugging into the BTTN data
center. Furthermore, BTTN’s cross-chain capabilities allow individual
businesses to transact with others globally in compliance with local
regulations.
The network also enables zero-knowledge proofs, which protect

anonymity during transfers over the network.96 Institutions may rest
assured that, even though they see no details of the data exchange,
the data are authentic and actionable.
BSN could play a significant role in spurring mass adoption of the

digital yuan and blockchain technology in and outside China, as
through members of the Belt and Road. There are two physically
separate versions of the BSN with two sets of blockchain options:
Table 2: Frameworks available in the BSN as of July 2022

Permissioned
Public frameworks
frameworks
1. ConsenSys 1. Algorand 7. Ethereum 13. Nervos
Quorum
2. Bityuan 8. Findora 14. Oasis
2. FISCO BCOS
3. Casper 9. IRISnet 15. Polkadot
3. Hyperledger Besu
4. Cypherium 10. Klaytn 16. ShareRing
4. Hyperledger Fabric
5. dfuse-EOS 11. NEAR 17. Solana
6. EOS 12. NEO 18. Tezos
Source: “Blockchain-based Service Network User Manual,” v1.8.1, Red Date (Hong Kong) Technology Ltd., modified 24 April
2022; and BSN Documentation, bsnbase.io/g/main/documentation, accessed 5 Aug. 2022.

» Services for developers outside China run on the cloud

services of Amazon, Google, and Microsoft in data centers in
Hong Kong, California, and Paris. There are portals in Hong
Kong, South Korea, Turkey, and Uzbekistan.
» Services for users inside the country run on the cloud services
of Baidu, China Mobile, China Unicom, and China Telecom.
Each PCN includes just about everything a municipality or zone might

need to become a blockchain-based “smart city”: multiple blockchain
frameworks for permissionless, permissioned, and interchain
solutions; integrated development environment; dedicated node
services; certificate authority management; and more.97 Data centers
and cloud resource providers install the PCN software and then link
to the BSN. Dapp publishers, then, can deploy their dapps to multiple
city nodes in the BSN, after which participants can enter at low cost
through the PCN gateway.
The BSN relies on the first Chinese-developed open-source

consortium blockchain platform, known as FISCO BCOS (short for
Financial Blockchain Shenzhen Consortium - Be Credible, Open, and
Secure)—a collaborative project developed by Beyondsoft, Digital
“Our goal is to build one China, Forms Syntron, Huawei, Shenzhen Securities Communications,
Tencent, WeBank, YIBI Technology, Yuexiu Financial Holdings, and
more layer on the Internet others.98 In a consortium blockchain model (aka permissioned
to make IT systems to blockchain), the application owner formulates all business attributes
communicate much more and requires users to gain approval before using that application.
efficiently.”
This contrasts with permissionless blockchain frameworks, where any
YIFAN HE user may anonymously write to or read from a blockchain app. The
Founder and CEO BSN initially integrated six public, permissionless blockchains—Tezos,
Red Date Technology NEO, Nervos, EOS, IRISnet, and Ethereum—but has added 12 more
public blockchain providers (Table 2, previous page).
Yifan He of Red Date Technology, the architect firm behind BSN, told
us that BSN is a cloud environment; when connected, all the data
centers become another layer on the Internet. He said, “Our goal
is to build one more layer on the Internet to make IT systems to
communicate much more efficiently.”99
The BSN has no commercial value, since it is a public resource and

public infrastructure, but it is a global project, not a China-only
initiative. So far, expanding the BSN to the Belt and Road countries
has been easier, since the West has thus far been more reluctant to
embrace BSN, even though BSN follows all international standards.
Mr. He said the biggest challenge has been not a tech-related one,
but a political one. He hopes that the technology will prevail in the
end, regardless of where it originates. Focusing more on digital
currencies, Mr. He discussed CBDCs with us and how BSN might be
helpful:
In ten years, more than half of transactions will be in digital

currencies [not cryptos], since they make transfers and
payments much more efficient, and you hold your own money.

Where is your money right now? It is just a balance number;

commercial banks move your money, but you have no control.
With CBDCs, you own your wallet. It changes the financial
infrastructure.100
Interoperability is key. Mr. He told us that Red Date Tech is currently

involved in a project working with large banks and European
tech companies outside China to build a SWIFT for CBDCs and
stablecoins.101 BSN has not worked much in the DCEP area, since
the digital yuan is a closed system; as of this writing, it allows only
commercial bank systems to connect (including through authorized
telecoms and payment service providers), not third-party systems.
Teal Bicycles in a Parking Lot by Markus Winkler, 2020, used under Pexels license.
Cropped to fit.
Implementation challenges
In 2016, the International Monetary Fund (IMF) added the Chinese
national currency to the IMF’s special drawing rights (SDR) basket.
However, at the end of the first quarter of 2022, the yuan made up
less than three percent of international reserves compared to the
US dollar’s 60 percent.102 But the US dollar’s share is down from 65
percent, as central bank reserve managers diversify their holdings.103
Beijing’s push to make the
Also, the yuan’s share in global foreign exchange reserves rose to
yuan a viable alternative 2.68 percent in the first quarter of 2022 from 2.33 percent in the
to the US dollar for previous three months, continuing the currency’s momentum.104
international transactions is
bearing fruit, albeit slowly. According to the IMF’s Currency Composition of Official Foreign
Exchange Reserves survey, total yuan foreign exchange reserves
jumped to an equivalent of $336.39 billion in the first quarter of
2022, achieving a dozen consecutive quarters of growth. The rise
suggests that Beijing’s push to make the yuan a viable alternative
to the US dollar for international transactions is bearing fruit, albeit
slowly.105 Aside from general issues arising from the use of CBDCs,
we identified several issues when it comes to the use of DCEP
specifically.

Lack of full convertibility of the yuan

The Chinese currency still lacks certain traits of the US dollar that
made the USD used worldwide. “One of the main reasons for the
yuan’s lack of progress is that it is not freely convertible,” Vita
Spivak, an analyst at the global consult firm Control Risk, explained:
“Instead, the [PBOC] sets a daily reference rate for the yuan against
the dollar, from which trading via interbank currency markets cannot
The Chinese currency still diverge by more than two percent.”106 She cautioned:
lacks certain traits of the
US dollar that made the Beijing may wish to promote the yuan’s greater
USD so widely used. internationalization, but periodic crises have shown that a
nonconvertible currency makes it easier to control the impact
of economic shocks on domestic financial markets. At the
outbreak of the coronavirus pandemic, for example, the
[PBOC] stopped the yuan from depreciating by selling foreign
exchange reserves.107
Since the yuan is not yet fully convertible, this may hinder the
internationalization process of its digital version. Still, the digital
yuan may be a better tool for gaining ground on the US dollar in
international markets through RCEP and the Belt and Road Initiative,
which includes over a dozen countries identified on the sanction lists
of the US Treasury Department’s Office of Foreign Assets Control.108
If there were enough penetration and acceptance of the digital
renminbi in a separate jurisdiction or region, a trade and finance
system parallel to the USD system could gain critical mass, allowing
certain countries to bypass the global banking system and US
sanctions.
However, such bold changes will not happen overnight. RMB will
not likely displace the USD in democratic economies any time soon,
even though we will see a clear and undeniable increase in the RMB’s
global stature.
Privacy of transactions
“Privacy in a CBDC goes
Privacy is a key concern, especially in the West where the use
beyond binary choices of physical cash provides a degree of anonymity. In its public
of anonymity or full consultation on a digital euro, the European Central Bank (ECB)
disclosure.” found, “What the public and professionals want the most from such
a digital currency is privacy (43%), followed by security (18%).”109
SRIRAM DARBHA AND Of the over 8,200 respondents—a record number for an ECB
RAKESH ARORA public consultation—94 percent were private citizens. Moreover, as
Research Staff researchers at the Bank of Canada noted, “Privacy in a CBDC goes
Bank of Canada beyond binary choices of anonymity or full disclosure.”110
Given the Chinese government’s history of monitoring, Mu

Changchun of the Digital Currency Institute said, “There’s actually
a big misunderstanding about the anonymity issue of the e-CNY
system.”111 He explained that the Chinese government cannot easily
link a phone number to an identity because, in August 2021, the
Chinese government formally passed the Personal Information

Protection Law. “Under that law, the telecom companies cannot

release any information, any identity information, to any third
parties, including the central bank,” said Mu.112
“The e-CNY system collects the least transaction information

compared to traditional electronic payment systems,” said Mu.
“The concern personally I have is how to effectively prevent and
combat money laundering, terrorist financing, and tax evasion
“The concern I have is how under an effective anonymous e-CNY system.”113 The DCEP system
to effectively prevent and provides “anonymity for small value,” that is, the government won’t
combat money laundering, monitor the small transactions (though how small is unclear), and
terrorist financing, and tax “traceability for high value,” where the government will check the
legitimacy of large transfers.114
evasion under an effective
anonymous e-CNY system.” As the former leader of China’s digital currency research Yao
MU CHANGCHUN Qian admitted, the purpose of the digital yuan was not to monitor
Director-General payments, because China can already do that. “Third-party payment
Digital Currency Institute technology can already enable the transparency of all real-time
People’s Bank of China transactions,” according to Qian.115
Effects on monetary policy

Different central banks have studied the potential effects of CBDCs
on monetary policy, but these have largely been academic studies in
the absence of actual deployment. The Chinese government needs
more time to see whether its research was accurate. According to
a Bank of Canada staff note, CBDCs could allow monetary policy
to break below the effective lower bound of nominal interest
rates, helping central bankers to manage inflation. A central bank
would need to remove cash (e.g., large-denomination notes) from
circulation or restrict cash holdings.116 A CBDC could also help
monetary policymakers to reduce “the incentives to adopt alternative
means of payment” such as the use of cryptocurrencies or foreign
currencies, which tend to diminish the central bank’s control.117
But no one really knows how a CBDC will affect the current channels
of transmission of monetary policy or whether new ones will emerge.
For example, interest on a CBDC may be a more direct policy
No one really knows how instrument because the financial sector need not pass it through
a central bank digital to the economy. The PBOC listed the hypotheticals in its July 2021
currency will affect the report:
current channels of
transmission of monetary » If CBDCs become more attractive than deposits, then DCEP
policy or whether new ones may disintermediate financial institutions, leading to narrow
banking and causing a credit squeeze.
will emerge.
» If CBDCs are easily available, then DCEP can enhance the
diffusion of policy rates in the money and credit markets.
» If CBDCs bear interest at a relatively attractive level, then

institutional investors might use them instead of low-risk
assets such as short-term government securities, thereby
affecting the prices of those assets.

» If CBDCs bear no interest, then the risk of their competing

with low-risk assets such as commercial bank deposits will be
lower, and they will have less impact on monetary policy.
To address these concerns, the design of DCEP does not depend on

users’ bank accounts, though it may be “loosely coupled” to those
accounts for consumers who want to link them. Moreover, the PBOC
claims to leverage “operational, technological, and policy designs to
The PBOC has set up a minimize the impact of e-CNY system on existing monetary system,
framework of big data financial system, and the real economy” and “prevent bank runs,” but
the report lacks technical detail.
analysis, risk monitoring,
and early warning for To reduce competition with bank deposits, e-CNY serves as a
e-CNY to enhance the substitute for M0 and pays no interest. It circulates just as physical
foresightedness, accuracy, RMB circulates through the two-tier system, where the PBOC issues
and effectiveness of e-CNY e-CNY and commercial banks distribute it to the public.
management.
Additionally, the PBOC has set up a framework of big data analysis,
risk monitoring, and early warning for e-CNY to enhance the
foresightedness, accuracy, and effectiveness of e-CNY management.
But the PBOC admits that digital fiat currency is a new field and so
it must continually watch and regularly assess e-CNY’s impact on all
the above.
Environmental impact
When it comes to blockchain’s environmental footprint, the main
objection to cryptocurrencies is the energy burned in bitcoin mining,
specifically from running the proof-of-work consensus mechanism,
“the process by which new bitcoins are entered into circulation.”118
It’s also the process for confirming new transactions and securing
the network, and it’s continually “performed using sophisticated
hardware that solves an extremely complex computational math
problem.”119
In July 2022, the Cambridge Centre for Alternative Finance reported

that bitcoin mining consumed around 81.55 terawatt-hours (TWh) of
electricity annually, slightly more than the whole of Belgium but less
Since the digital yuan than all the refrigerators running in the United States (104 TWh).120
Before mainland China’s latest crackdown on bitcoin mining and
requires no proof of work trading, the country accounted for 86 TWh of that total, almost 70
or other energy-intensive percent of the world’s bitcoin mining, especially in the Inner Mongolia
consensus mechanism, we autonomous region, which accounted for eight percent globally.121
expect its carbon footprint Given that over half the electricity came from burning coal, the
to be much less than Chinese government held that its bitcoin mining ban was in line with
bitcoin and altcoins. its carbon reduction goals.122 Since the digital yuan requires no proof
of work or other energy-intensive consensus mechanism, we expect
its carbon footprint to be much less than bitcoin and altcoins.
Closed crypto system

Since the Chinese government wants a tight control on its economy,
it viewed decentralized instruments like cryptocurrencies as threats.
In September 2017, it banned the practice of raising funds through

initial coin offerings (ICOs) in China. Seven Chinese regulators—the

PBOC, the Cyberspace Administration of China (CAC), the Ministry of
Industry and Information Technology (MIIT), the State Administration
for Industry and Commerce (SAIC), the China Banking Regulatory
Commission (CBRC), the China Securities Regulatory Commission
(CSRC), and the China Insurance Regulatory Commission (CIRC)—
jointly issued the “Announcement on Preventing Financial Risks
from Initial Coin Offerings” (aka ICO Rules) to protect investors and
Under the ICO Rules, mitigate financial risk.123 Under the ICO Rules, raising funds through
raising funds through the irregular sale and circulation of tokens is essentially engaging in
the irregular sale and public financing without authorization, and that’s illegal.
circulation of tokens is
In 2018, China Central Television defined blockchain’s economic
engaging in public financing value as “10 times more valuable than the Internet.”124 Despite its
without authorization, and tough stance on cryptocurrencies, the Chinese government was
that’s illegal. encouraging Chinese companies to explore blockchain technology. In
October 2019, President Xi said that the country needed to “seize the
opportunity afforded by blockchain technology.”125
In May 2021, Chinese-mainland authorities took a tougher stand

on cryptocurrencies by imposing a new ban on cryptocurrency
transactions and speculative crypto trading. Institutions could
no longer accept virtual currencies, use them as a means of
payment and settlement, nor offer their clients services involving
cryptocurrencies, such as registration, trading, clearing, and
settlement.
In June 2021, the PBOC announced that it had summoned several

major banks and payments service providers like Alipay to crack
down on crypto trading and transactions. This followed orders to
block crypto-related social media accounts and shut down bitcoin
mining in Sichuan province and the autonomous regions of Xinjiang
and Inner Mongolia.126
Key takeaways
Any business operating Any business operating in China or conducting operations with
in China or conducting Chinese companies would be wise to prepare for using the digital
operations with Chinese yuan. That means looking to open e-CNY wallets for internal
companies would be wise to transactions, the only ones taking place right now, but cross-border
prepare for using the digital transactions in e-CNY may become more common in a few years.
yuan.
Within China, the government will encourage or even require
companies to use e-CNY in certain use cases. According to available
information, merchants in China may refuse to accept Alipay or
WeChat Pay, but they must accept payments in China´s digital
yuan—and this applies to local and foreign companies. For example,
McDonald’s, Starbucks, and Subway were among the global
companies taking part in the initial e-CNY tests in April 2020.127

How foreign companies will register is still unclear. For companies

in China, there should be no problem at all: Pindar Wong expects
nearly all companies in China’s domestic market to have an account
in e-CNY, for convenience and taxation primarily. Wong also viewed
this whole situation as an opportunity for Hong Kong in its role as
the most important offshore yuan center. He thought that the cross-
border testing was also a positive for Hong Kong as Asia’s world
city.128
China is well positioned
to adopt a CBDC because China is well positioned to adopt a CBDC because many of its citizens
many citizens use similar already use comparable products, such as WeChat Pay and Alipay.
products such as WeChat But DCEP has another important advantage over other systems: its
digital wallets charge no fees and require no Internet connection
Pay and Alipay. to use. At the Olympic Games venues, foreign visitors used e-CNY
hardware wallets in the form of electronic cards to conduct touch-
based transactions, contributing to the “couple million renminbi
worth of transactions every day during the Olympics.”129
Moreover, much has been written about economic sanctions

and SWIFT—for example, coverage of the war in Ukraine and
consequent moves to sanction Russia have put a spotlight on
SWIFT as an integral part of the global payments system.130 With an
internationalized RMB, companies foreign and domestic will be able
to settle transactions globally and independently of the US dollar, and
that makes several US senators very uncomfortable.131
Indeed, many countries along the Belt and Road Initiative may
benefit from using the e-CNY instead of the greenback for
transactions, since the DCEP may be faster, cheaper, and easier to
use than SWIFT. But BitMint CEO Amnon Samid, who participated
in developing retail CBDC trials for China, told Forkast that, at this
stage, China may propose to Russia to deploy the digital yuan for
settling transactions in yuan on both sides of the border, but “it
cannot serve as a substitute to the SWIFT system.”132
Gray Metal Door Knobs by Kayla Kozlowski, 2019, used under Unsplash license.
Cropped to fit.

About the authors

Dr. Oriol Caudevilla
Dr. Caudevilla works as co-leader of the Financial Inclusion and
CBDCs Working Groups at the Global Impact FinTech (GIFT) Forum
and serves as a strategic advisor to the Hong Kong-based WealthTech
company, ETFCool, and to Alpha Bright Asset Management (Hong
Kong). He serves as a mentor at R3 (Singapore), Cyberport (Hong
Kong), Hong Kong Science and Technology Park, F10 Incubator &
Accelerator (Singapore), Tribe (Singapore), and Rise by Barclays
(London and Mumbai). Dr. Caudevilla is a fellow at the Digital Euro
Association and the Singapore University of Social Sciences as well
as an honorary fellow at the Asian Institute of International Financial
Law at the University of Hong Kong. He is a member of the FinTech
Association of Hong Kong, the Singapore Fintech Association, and
FinTech Australia. Furthermore, he has published articles in China
Daily (both global and Hong Kong editions), Macau Business, and
others. He has given talks and seminars on the Chinese financial
system, CBDCs, and the digital yuan in several universities in the
United States, Canada, mainland China, Hong Kong, and Macau
as well as at international conferences such as Israel/United Arab
Emirates Fintech Week, the Future of Fintech Saudi Arabia, and the
Greater Bay Area Blockchain Week.
Dr. Henry Kim

Henry M. Kim is an associate professor at the Schulich School
of Business, York University, in Toronto. He is director of the
blockchain.lab at Schulich and co-lead on York’s digital currencies
project. He has authored more than 30 publications on blockchain
technologies and worked on blockchain research projects with
the Toronto and Region Conservation Authority, the Canadian
blockchain start-up Aion, and the Ontario Ministry of Agriculture,
Food, and Rural Affairs, among others. He is co-organizer of the
Fields Institute Seminar Series on Blockchain as well as the 2020
and 2022 IEEE Conference on Blockchain and Cryptocurrencies.
Dr. Kim speaks and consults broadly on digital transformation. He
served as a senior research fellow at Novera Capital (2018–2020),
a Canadian decentralized finance enabler, and Insolar (2018–
2020), a Swiss blockchain platform provider; and as a director
of Blockmine Development (2018–2019). Dr. Kim holds a PhD in
industrial engineering from University of Toronto and a master’s from
University of Michigan.
Disclosures
The authors have no ownership stakes or advisory roles in any of the
companies featured.

About the Blockchain Research Institute

Co-founded in 2017 by Don and Alex Tapscott, the Blockchain
Research Institute is an independent, global think tank established
to help realize the new promise of the digital economy. For several
years now, we have been investigating the transformative and
disruptive potential of Web3 and blockchain technology on business,
government, and society.
Our syndicated research program, which is funded by major

corporations and government agencies, aims to fill a large gap in
the global understanding of blockchain protocols, applications, and
ecosystems and their strategic implications for enterprise leaders,
supply chains, and industries.
Our global team of blockchain experts is dedicated to exploring,

understanding, documenting, and informing leaders of the market
opportunities and implementation challenges of this nascent
technology. Research areas include financial services, manufacturing,
retail, energy and resources, technology, media, telecommunications,
healthcare, and government as well as the management of
organizations, the transformation of the corporation, and the
regulation of innovation. We also explore blockchain’s potential role in
the Internet of Things, robotics and autonomous machines, artificial
intelligence, and other emerging technologies.
Our findings are initially proprietary to our members and are

ultimately released under a Creative Commons license to help
achieve our mission. To find out more, please visit
www.blockchainresearchinstitute.org.
Research management
Don Tapscott – Co-Founder and Executive Chairman

Kirsten Sandberg – Editor-in-Chief
Alisa Acosta – Director of Research and Education
Others in the BRI leadership team
Joan Bigham – Global Director

Andrew Facciolo – Director of Client Experience
Douglas Heintzman – Chief Catalyst
Roya Hussaini – Director of Administration
Jody Stevens – Director of Finance
Alex Tapscott – Co-Founder

Acknowledgments
The authors thank Shanghai-based fintech expert Richard Turrin, an
award-winning executive and the author of the international best-
selling books, Cashless: China’s Digital Currency Revolution and
Innovation Lab Excellence; Pindar Wong, chairman of VeriFi (Hong
Kong) Limited, an Internet pioneer, and head of the Belt and Road
Blockchain Consortium; Charles d’Haussy, managing director of
ConsenSys Asia-Pacific, co-author of Block Kong, former head of
fintech at Invest Hong Kong, and a Top-50 FinTech Influencer in Asia
(2018); and Yifan He, founder and chief executive officer of Red Date
(Hong Kong) Technology Company Limited. The Blockchain Research
Institute thanks the editorial development team for the thorough
work on this project.
Notes
1. Krishna Srinivasan, “Opening Remarks at Peer-Learning Series on Digital Money/
Technology: Central Bank Digital Currency and the Case of China,” International Monetary
Fund, 7 July 2022. www.imf.org/en/News/Articles/2022/07/07/sp070722-central-bank-
digital-currency-and-the-case-of-china, accessed 15 July 2022.
2. Jon Brodkin, “GOP Senators Want to Ban China’s Digital Currency from US Apps and App
Stores,” Ars Technica, Condé Nast Holdings Ltd., 27 May 2022. arstechnica.com/tech-
policy/2022/05/gop-senators-want-to-ban-chinas-digital-currency-from-us-apps-and-app-
stores, accessed 15 July 2022.
3. S.4313, “Defending Americans from Authoritarian Digital Currencies Act,” 117th Congress
(2021-2022). www.congress.gov/bill/117th-congress/senate-bill/4313, accessed
15 July 2022.
4. Vivian Wang and Zixu Wang, “‘My Worldview Has Been Destroyed’: Chinese Banking
Scandal Tests Faith in the System,” NYTimes, New York Times Co., 19 July 2022. www.
nytimes.com/2022/07/19/world/asia/china-bank-scandal-protest.html, accessed
19 July 2022.
5. Francis Chan, “How a Digital Yuan Threatens China Banks, Alipay, and WeChat Pay,”
Bloomberg Intelligence Blog, Bloomberg LP, 6 Dec. 2021. www.bloomberg.com/
professional/blog/how-a-digital-yuan-threatens-china-banks-alipay-and-wechat-pay,
accessed 15 July 2022.
6. Tony Richards, “The Future of Payments: Cryptocurrencies, Stablecoins, or Central Bank
Digital Currencies?” Address to the Australian Corporate Treasury Association, Reserve
Bank of Australia, 18 Nov. 2021. www.rba.gov.au/speeches/2021/sp-so-2021-11-18.
html; Kristalina Georgieva, “The Future of Money: Gearing up for Central Bank Digital
Currency,” Atlantic Council, Washington DC, 9 Feb. 2022. International Monetary Fund,
www.imf.org/en/News/Articles/2022/02/09/sp020922-the-future-of-money-gearing-up-
for-central-bank-digital-currency, accessed 15 July 2022.
7. Oriol Caudevilla, “China’s Digital Yuan: Analysis and Opportunities for the Greater Bay
Area,” hosted by Stephen Minas, Peking University, 17 March 2021. english.pku.edu.cn/
events/11766.html, accessed 1 April 2022.
8. Marc Jones, “Over $315,000 in Digital Yuan Used Every Day at Olympics, PBOC Official
Says,” Reuters, Thomson Reuters Corp., 16 Feb. 2022. www.reuters.com/technology/
around-300-mln-digital-yuan-used-every-day-olympics-pboc-official-says-2022-02-15,
accessed 1 April 2022.
9. Jonathan Movroydis, “What the Rise of China’s Digital Currency Could Mean for the
[United States],” Stanford Graduate School of Business, Stanford Univ., 23 March 2022.
www.gsb.stanford.edu/insights/what-rise-chinas-digital-currency-could-mean-us,
10. Codruta Boar and Andreas Wehrli, “Ready, Steady, Go? Results of the Third BIS Survey
on Central Bank Digital Currency,” BIS Paper No. 114, Bank of International Settlements,
Jan. 2021. www.bis.org/publ/bppdf/bispap114.pdf, accessed 15 July 2022.
11. Anneke Kosse and Ilaria Mattei, “Gaining Momentum: Results of the 2021 BIS Survey on
Central Bank Digital Currencies,” BIS Paper No. 125, Bank of International Settlements,
May 2022. www.bis.org/publ/bppdf/bispap125.pdf, accessed 15 July 2022.
12. Suyan Chen, “Progress of Research and Development of E-CNY in China,” Working Group
on E-CNY Research and Development, People’s Bank of China, 16 July 2021. www.pbc.
gov.cn/en/3688110/3688172/4157443/4293696/2021071614584691871.pdf, accessed
1 April 2022.

13. Fang Jin, “Belt and Road Initiative: Progress, Problem, and Prospects,” Center for
Strategic and International Studies, 22 Sept. 2017. www.csis.org/belt-and-road-initiative-
progress-problems-and-prospects, accessed 15 July 2022.
14. Robert Ward, “RCEP Trade Deal: A Geopolitical Win for China,” Analysis Blog, International
Institute for Strategic Studies, 25 Nov. 2020. www.iiss.org/blogs/analysis/2020/11/rcep-
trade-deal, accessed 15 July 2022.
15. CBN Editor, “SWIFT Launches Joint Venture in Beijing with Chinese Central Bank’s Digital
Currency Research Institute,” China Banking News, 5 Feb. 2021. www.chinabankingnews.
com/2021/02/05/swift-launches-joint-venture-in-beijing-with-chinese-central-banks-
digital-research-institute, accessed 15 July 2022.
16. “Joint Statement on the Multiple Central Bank Digital Currency (m-CBDC) Bridge Project,”
Press Release, Hong Kong Monetary Authority, 23 Feb. 2021. www.hkma.gov.hk/eng/
news-and-media/press-releases/2021/02/20210223-3, accessed 15 July 2022.
17. BTC China in 2011 and Baidu in 2013. Ryan Browne, “Bitcoin Production Roars Back in
China Despite Beijing’s Ban on Crypto Mining,” CNBC.com, NBC Universal,
18 May 2022. www.cnbc.com/2022/05/18/china-is-second-biggest-bitcoin-mining-hub-
as-miners-go-underground.html; Rakesh Sharma, “China’s History with Cryptocurrency,”
Investopedia, Dotdash Meredith, updated 27 Dec. 2021. www.investopedia.com/news/
price-cryptocurrencies-totally-dependent-china, accessed 15 July 2022.
18. Richard Turrin, interviewed via Zoom by Oriol Caudevilla, 10 Dec. 2021.
19. Richard Turrin, interviewed via Zoom by Oriol Caudevilla, 10 Dec. 2021.
20. For an excellent summary and timeline of China’s blockchain efforts, see Alice Ekman,
China’s Blockchain and Cryptocurrency Ambitions: The First-Mover Advantage, European
Union Institute for Security Studies, 13 July 2021. www.iss.europa.eu/sites/default/files/
EUISSFiles/Brief_15_2021.pdf, accessed 15 July 2022.
21. “Inthanon-LionRock to mBridge: Building a Multi CBDC Platform for International
Payments,” BIS Innovation Hub Paper 40, Bank of International Settlements,
28 Sept. 2021, p. 13. www.bis.org/publ/othp40.pdf, accessed 15 July 2022.
22. “Digital Yuan: What Is It and How Does It Work?” DB.com, Deutsche Bank AG,
14 July 2021. www.db.com/news/detail/20210714-digital-yuan-what-is-it-and-how-does-
it-work, accessed 15 July 2022.
on E-CNY Research and Development, People’s Bank of China, 16 July 2021. www.pbc.
gov.cn/en/3688110/3688172/4157443/4293696/2021071614584691871.pdf; and James
Chen, “Monetary Base,” Investopedia, Dotdash Meredith, updated 9 March 2021. www.
investopedia.com/terms/m/monetarybase.asp, accessed 15 July 2022.
on E-CNY R&D, PBOC, 16 July 2021.
25. Charles d’Haussy, interviewed via Zoom by Oriol Caudevilla, 16 Dec. 2021.
26. Tang Ching, “The Central Bank’s Digital Research Institute Talks about Blockchain:
Decentralization of Technology Does Not Mean Decentralization of Management,” Sina
Finance, SINA Corp., 13 Sept. 2021. finance.sina.com.cn/blockchain/roll/2021-09-13/doc-
iktzscyx3969921.shtml, accessed 1 April 2022.
28 Sept. 2021. www.bis.org/publ/othp40.pdf, accessed 15 July 2022.
Finance, SINA Corp., 13 Sept. 2021. finance.sina.com.cn/blockchain/roll/2021-09-13/doc-
iktzscyx3969921.shtml, accessed 1 April 2022.
29. “Trade Finance,” Hong Kong Monetary Authority, n.d. www.hkma.gov.hk/eng/key-
functions/international-financial-centre/fintech/research-and-applications/trade-finance;
and “Introduction to eTradeConnect,” Hong Kong Trade Finance Platform Co. Ltd., n.d.
www.hkicl.com.hk/eng/our_services/etradeconnect.php, accessed 15 July 2022.
Finance, SINA Corp., 13 Sept. 2021. finance.sina.com.cn/blockchain/roll/2021-09-13/
doc-iktzscyx3969921.shtml; Naveen Kapoor, “Blockchain technology Reshaping the
Trade Finance Processes,” Naviin Kapoor Blog, Medium.com, 27 Aug. 2018. medium.
com/@naviinkapoor/blockchain-technology-reshaping-the-trade-finance-processes-
852130f4cacf; “How [Robotic Process Automation] and Blockchain Can Work Together,”
101 Blockchains, 9 Feb. 2021. 101blockchains.com/blockchain-and-rpa, accessed
15 July 2022.
31. “A Conversation with Mu Changchun,” Video (21:57), mod. Chris Brummer and Jon Frost,
Day 1, DC Fintech Week 2021, Institute of International Economic Law, Institute for
Financial Markets, and Bank of International Settlements, 21 Oct. 2021. YouTube, www.
youtube.com/watch?v=8tmp_dy-Ba8, accessed 15 July 2022.
33. Belt and Road Blockchain Consortium, n.d. www.beltandroadblockchain.org, accessed
15 July 2022.
34. Pindar Wong, interviewed via Zoom by Oriol Caudevilla, 11 Feb. 2022.

36. CFI Team, “Double-Spending,” Corporate Finance Institute, CFI Education Inc.,
27 Sept. 2020. corporatefinanceinstitute.com/resources/knowledge/other/double-
spending, accessed 15 July 2022.
38. Suyan Chen, “Progress of Research and Development of E-CNY in China,” Working
Group on E-CNY R&D, PBOC, 16 July 2021; and Tom Phillips, “PBOC Pilots Contactless
Cards and Wearables That Let Consumers Make Payments with China’s Digital
Currency,” Near-Field Communication World, SJB Research Ltd., 8 Jan. 2021. www.
nfcw.com/2021/01/08/369942/pboc-pilots-contactless-cards-and-wearables-that-let-
consumers-make-payments-with-chinas-digital-currency, accessed 17 Dec. 2021.
39. Nick Szabo, “Winning Strategies for Smart Contracts,” foreword by Don Tapscott,
Blockchain Research Institute, 4 Dec. 2017. www.blockchainresearchinstitute.org/project/
smart-contracts.
40. Chris Motola, “The Eight Best Payment Gateway and Credit Card APIS for Developers,”
Merchant Maverick, 20 July 2022. www.merchantmaverick.com/payment-api-credit-card-
processing, accessed 20 July 2022.
41. Anjali C. Das, “China’s New Personal Information Protection Law,” National Law Review XI,
No. 336, 2 Dec. 2021. www.natlawreview.com/article/china-s-new-personal-information-
protection-law, accessed 15 July 2022.
42. Mu Changchun, “Central Bank Digital Currency and the Case of China,” Presentation,
Peer-Learning Webinar Series on Digital Technologies/Money in Asia and the Pacific,
International Monetary Fund, Washington, DC, 6 July 2022. www.imf.org/en/News/
Seminars/Conferences/2022/03/09/digital-technologies-and-digital-money-in-asia-
and-the-pacific; see accompanying video and presentation, “IMF-The Case of China
v5,” PDF file created by Luojing, 7 July 2022; and “The e-CNY APP,” Video (00:01:36),
Digital Currency Institute, People’s Bank of China, 8 July 2022. www.imf.org/en/Videos/
view?vid=6309287595112, accessed 5 Aug. 2022.
43. Executive Summary, “Global Findex Database 2021: Financial Inclusion, Digital Payments,
and Resilience in the Age of COVID-19,” World Bank, World Bank Group, 29 June 2022.
thedocs.worldbank.org/en/doc/25dde6ca97fde9ec442dcf896cbb7195-0050062022/
original/Findex-2021-Executive-Summary.pdf, accessed 15 July 2022.
44. CK Prahalad and Stuart L. Hart, “The Fortune at the Bottom of the Pyramid,” Strategy
& Business 26, 10 Jan. 2002. Booz & Co., www.strategy-business.com/article/11518,
accessed 15 Jan. 2022.
45. Michael Gu, “China’s National Digital Currency DCEP / CBDC Overview,” Boxmining,
Automattic Inc., 14 July 2022. boxmining.com/dcep, accessed 18 July 2022.
46. David Olsson, Andrew Fei, Urszula McCormack, Leimin Yu, and Wang Rong, “China’s
Digital RMB: Is Your Business Ready?” King & Wood Mallesons, 27 April 2021. www.kwm.
com/au/en/insights/latest-thinking/chinas-digital-rmb-is-your-business-ready.html,
accessed 15 Dec. 2021.
47. Renee Mu, “CNH vs CNY: Differences Between the Two Yuan,” NASDAQ, Nasdaq Inc.,
12 Sept. 2018. www.nasdaq.com/articles/cnh-vs-cny-differences-between-two-
yuan-2018-09-12, accessed 15 June 2022.
49. Cissy Zhou and Masha Borak, “Shenzhen Gives Out 10m Yuan in Digital Currency Lottery
Promotion Involving 50,000 ‘Red Packets’ Is Another Step Toward Beijing’s Goal of a
Cashless Society,” South China Morning Post, Alibaba Group, 10 Oct. 2020. www.scmp.
com/economy/china-economy/article/3104832/chinas-shenzhen-giving-away-millions-
sovereign-digital-yuan, accessed 15 July 2022.
50. “China to Pilot Digital Currency,” Xinhuanet, Xinhua News Agency, 14 Aug. 2020. www.
xinhuanet.com/english/2020-08/14/c_139290734.htm, accessed 15 July 2022.
51. Cheng Shi and Gao Xinhong, “E-CNY Signals Digitalization to ‘Connect Everything,’”
China Daily, China Daily Hong Kong Ltd., 22 March 2021. www.chinadailyhk.com/
article/161125#E-CNY-signals-digitalization-to-’connect-everything, accessed
5 Aug. 2022.
52. Xingqiang (Alex) He, “Digital RMB: A Possible Way to Reassert Data Control in the Digital
Economy,” Policy Brief No. 169, Centre for International Governance Innovation,
Nov. 2021. www.cigionline.org/static/documents/PB_no.169.pdf, accessed 15 July 2022.
53. Yolanda Huang, “China’s DCEP Project Launches Biggest Digital Yuan Test Yet,” Forkast
News, Forkast Ltd., 3 March 2021. forkast.news/china-dcep-digital-yuan-pros-cons;
Arjun Kharpal, “China to Hand Out $6.2 Million in Digital Currency to Beijing Residents
as Part of Trial,” CNBC.com, NBC Universal, 2 June 2021. www.cnbc.com/2021/06/02/
china-digital-currency-beijing-to-hand-out-6point2-million-in-trial.html; Evelyn Cheng,
“Another Chinese City Launches a Digital Currency Test — This Time It’s Much Larger
at $6 Million,” CNBC.com, NBC Universal, 24 Feb. 2021. www.cnbc.com/2021/02/24/
chinese-city-chengdu-launches-6-million-digital-currency-test.html; Coco Feng, “China
Digital Currency: Shenzhen Hands Out e-CNY Vouchers Worth US$4.5 Million via Internet
Platform Meituan,” South China Morning Post, Alibaba Group, 31 May 2022. www.scmp.
com/tech/tech-trends/article/3179824/china-digital-currency-shenzhen-hands-out-e-cny-
vouchers-worth, accessed 15 July 2022.

54. Andrew Galbraith and Samuel Shen, “China Central Bank Launches Digital Yuan
Wallet Apps for Android, iOS,” Reuters, Thomson Reuters, 4 Jan. 2022. www.reuters.
com/markets/currencies/china-cbank-launches-digital-yuan-wallet-apps-android-
ios-2022-01-04, accessed 15 July 2022
55. Eamon Barrett, “Visa Had a Monopoly on Payments at the Olympics for 36 Years.
China Put an End to That,” Fortune.com, Fortune Media IP Ltd., 11 Feb. 2022. fortune.
com/2022/02/11/2022-olympics-beijing-china-visa-credit-card-digital-yuan, accessed
23 March 2022.
56. Marc Jones, “Over $315,000 in Digital Yuan Used Every Day at Olympics, PBOC Official
Says,” Reuters, Reuters News & Media Inc., Thomson Reuters Corp., 16 Feb. 2022. www.
reuters.com/technology/around-300-mln-digital-yuan-used-every-day-olympics-pboc-
official-says-2022-02-15, accessed 15 June 2022.
57. Frank Tang, “China’s Digital Currency Racks up ‘a Couple of Million’ Yuan of Payments per
Day at the Beijing Winter Olympics,” South China Morning Post, Alibaba Group,
16 Feb. 2022. www.scmp.com/economy/china-economy/article/3167271/chinas-digital-
currency-racks-couple-million-yuan-payments, accessed 15 July 2022.
59. Coco Feng, “How Chinese Advances in technology, from 5G and Cloud Computing to the
e-yuan, Power Beijing Winter Paralympic Games,” South China Morning Post, Alibaba
Group, 4 March 2022. www.scmp.com/tech/tech-trends/article/3169152/how-chinese-
advances-technology-5g-and-cloud-computing-e-yuan, accessed 15 July 2022.
60. China State Council Information Office, “MIL-OSI China: ATMs to Take e-CNY Evolution
Forward,” Foreign Affairs, Multimedia Investments Ltd., 2 July 2022. foreignaffairs.
co.nz/2022/07/02/mil-osi-china-atms-to-take-e-cny-evolution-forward; and “Competition
Zones,” 19th Asian Games Hangzhou 2022, n.d. www.hangzhou2022.cn/En, accessed
15 July 2022.
61. Manyika Kangai, “Here Are Five Things That Happened in China This Week,” Sunday
Mail, Zimpapers Ltd., 18 July 2022. www.sundaymail.co.zw/here-are-five-things-that-
happened-in-china-this-week-19, accessed 20 July 2022.
co.nz/2022/07/02/mil-osi-china-atms-to-take-e-cny-evolution-forward, accessed
15 July 2022.
63. CBN Editor, “China Construction Bank Permits Digital Renminbi Purchases of Wealth
Management Products,” China Banking News, 23 June 2022. www.chinabankingnews.
com/2022/06/23/china-construction-bank-permits-digital-renminbi-purchases-of-wealth-
management-products, accessed 15 July 2022.
64. CBN Editor, “Yangtze River Delta Launches Cross-regional Digital Renminbi Trials to Drive
Carbon Mitigation Goals,” China Banking News, 7 July 2022. www.chinabankingnews.
com/2022/07/07/yangtze-river-delta-launches-cross-regional-digital-renminbi-trials-to-
drive-carbon-mitigation-goals, accessed 15 July 2022.
65. Zhang Junmian, “Digital RMB Application Continues to Expand in China,” WebNews, China
Internet Information Center, 21 July 2022. www.china.org.cn/business/2022-07/21/
content_78333962.htm, accessed 22 July 2022.
66. “Inthanon-LionRock: Leveraging Distributed Ledger Technology to Increase Efficiency
in Cross-Border Payments,” Bank of Thailand and the Hong Kong Monetary Authority,
23 Jan. 2020. www.hkma.gov.hk/media/eng/doc/key-functions/financial-infrastructure/
Report_on_Project_Inthanon-LionRock.pdf, accessed 15 July 2022.
67. BIS, IMF, and the World Bank Group, “Central Bank Digital Currencies for Cross-Border
Payments: Report to the G20,” BIS Innovation Hub Paper 38, Bank of International
Settlements, July 2021. www.bis.org/publ/othp38.pdf, accessed 15 July 2022.
68. “Inthanon-LionRock: Leveraging Distributed Ledger Technology to Increase Efficiency
in Cross-Border Payments,” Bank of Thailand and the Hong Kong Monetary Authority,
23 Jan. 2020. www.hkma.gov.hk/media/eng/doc/key-functions/financial-infrastructure/
Report_on_Project_Inthanon-LionRock.pdf, accessed 15 July 2022.
69. The test included four jurisdictions, but the report doesn’t specify the two beyond Hong
Kong and Thailand. “Inthanon-LionRock to mBridge: Building a Multi CBDC Platform
for International Payments,” BIS Innovation Hub Paper 40, Bank of International
Settlements, 28 Sept. 2021, p. 13. www.bis.org/publ/othp40.pdf, accessed 15 July 2022.
28 Sept. 2021, p. 52. www.bis.org/publ/othp40.pdf, accessed 15 July 2022.
71. Mu was speaking at the Hong Kong International Financial Center Status and Prospects
Seminar. Eliza Gkritsi, “China, Hong Kong Enter Second Phase of Cross-Border Digital
Yuan Trials: Report,” CoinDesk, Digital Currency Group, 9 Dec. 2021. www.coindesk.com/
policy/2021/12/09/china-hong-kong-enter-second-phase-of-cross-border-digital-yuan-
trials-report, accessed 17 Dec. 2021.
72. “Multiple CBDC (mCBDC) Bridge,” BIS Innovation Hub, Bank for International
Settlements, 8 April 2021. www.bis.org/about/bisih/topics/cbdc/mcbdc_bridge.htm,

73. Victor Zhong, “China Acts to Rein in Yuan,” The Standard, Standard Newspaper Publishing
Ltd., 10 Dec. 2021. www.thestandard.com.hk/sections-news-print/236879/China-acts-to-
rein-in-yuan, accessed 15 July 2022.
74. “Policy Briefing and Meeting of the Legislative Council Panel on Financial
Services,” Orange News, 6 Feb. 2022. YouTube, www.youtube.com/
watch?v=TNLqSpmEz9I&t=4848s; Timmy Shen with Ningwei Qin, “China’s e-CNY Pilot to
Boost Hong Kong as Offshore Yuan Trading Center,” Forkast News, Forkast Ltd., 10 Feb.
2022. forkast.news/chinas-e-cny-pilot-to-boost-hong-kong-as-offshore-yuan-trading-
center, accessed 15 July 2022.
75. Eddie Yue, “Connecting the Digital Islands—Next Steps in Trade Finance,” The Future
of Trade Finance: Opportunities for Hong Kong, Asia and the World, HKU Asia Global
Institute and International Chamber of Commerce, 26 Jan. 2022. www.hkma.gov.hk/eng/
news-and-media/speeches/2022/01/20220126-2, accessed 15 July 2022.
76. Eddie Yue, “Connecting the Digital Islands—Next Steps in Trade Finance,” The Future
of Trade Finance: Opportunities for Hong Kong, Asia and the World, HKU Asia Global
Institute and International Chamber of Commerce, 26 Jan. 2022. www.hkma.gov.hk/eng/
news-and-media/speeches/2022/01/20220126-2, accessed 15 July 2022.
77. “e-HKD: A Policy and Design Perspective,” Hong Kong Monetary Authority, 27 April 2022.
www.hkma.gov.hk/media/eng/doc/key-functions/financial-infrastructure/e-HKD_A_
Policy_and_Design_Perspective.pdf, accessed 15 July 2022.
co.nz/2022/07/02/mil-osi-china-atms-to-take-e-cny-evolution-forward, accessed
15 July 2022.
79. “About RCEP,” ASEAN Secretariat, n.d. rcepsec.org/about, accessed 15 July 2022.
80. Kate Whiting, “An Expert [Deborah Elms] Explains: What Is RCEP, the World’s Biggest
Trade Deal?” WEForum.org, World Economic Forum, 18 May 2021. www.weforum.org/
agenda/2021/05/rcep-world-biggest-trade-deal, accessed 15 July 2022.
81. “RCEP: Asia-Pacific Countries Form World’s Largest Trading Bloc,” BBC News, British
Broadcasting Corp., 16 Nov. 2020. www.bbc.com/news/world-asia-54949260, accessed
5 Aug. 2022.
82. Kate Whiting, “An Expert [Deborah Elms] Explains: What Is RCEP, the World’s Biggest
Trade Deal?”
83. “ASEAN China’s Top Trade Partner, EU 2nd, US 3rd,” Fibre2Fashion, Fibre2Fashion Private
Ltd., 13 May 2022. www.fibre2fashion.com/news/textile-news/asean-china-s-top-trade-
partner-eu-2nd-us-3rd-280670-newsdetails.htm, accessed 15 July 2022.
84. Barry Eichengreen, “Sanctions, SWIFT, and China’s Cross-Border Interbank Payments
System,” CSIS Briefs, Center for Strategic and International Studies, 20 May 2022. www.
csis.org/analysis/sanctions-swift-and-chinas-cross-border-interbank-payments-system,
85. Karen Yeung, “China’s SWIFT Joint Venture a ‘Defensive Move’ in US Financial War after
Alaska Talks Underlined Ongoing Tensions,” South China Morning Post, Alibaba Group,
24 March 2021. www.scmp.com/economy/china-economy/article/3126780/chinas-swift-
joint-venture-defensive-move-us-financial-war, accessed 15 July 2022.
86. Hu Tianjiao, “New Move for Digital Renminbi? SWIFT Joins Hands with Central Bank
Clearing Center, Digital Currency Research Institute,” 21st Century Business Herald,
4 Feb. 2021. SINA Corp., finance-sina-com-cn.translate.goog/tech/2021-02-04/doc-
ikftpnny4518708.shtml?_x_tr_sl=zh-CN&_x_tr_tl=en&_x_tr_hl=en&_x_tr_pto=sc,
87. CBN Editor, “SWIFT Launches Joint Venture in Beijing with Chinese Central Bank’s Digital
Currency Research Institute,” China Banking News, 5 Feb. 2021. www.chinabankingnews.
com/2021/02/05/swift-launches-joint-venture-in-beijing-with-chinese-central-banks-
digital-research-institute, accessed 15 July 2022.
88. Karen Yeung, “China’s SWIFT Joint Venture a ‘Defensive Move’ in US Financial War after
Alaska Talks Underlined Ongoing Tensions,” South China Morning Post, Alibaba Group,
24 March 2021.
89. Cheng Guoqiang, “The Belt and Road: A Mission to Benefit Two-Thirds of the World,”
Horizons: Journal of International Relations and Sustainable Development, no. 4 (2015):
154–61. www.jstor.org/stable/48573565, accessed 5 Aug. 2022.
90. Rajesh Bansal and Somya Singh, “Digital Yuan: A Tool for Internationalization,” China’s
Digital Yuan: An Alternative to the Dollar-Dominated Financial System (Carnegie
Endowment for International Peace, 2021): 10–15. www.jstor.org/stable/resrep34852.9,
91. Vision and Actions on Jointly Building Silk Road Economic Belt and 21st-Century Maritime
Silk Road, 1st ed., National Development and Reform Commission, Ministry of Foreign
Affairs, and Ministry of Commerce of the People’s Republic of China, with State Council
authorization, 28 March 2015. Wayback Machine, web.archive.org/web/20150410045834/
https://en.ndrc.gov.cn/newsrelease/201503/t20150330_669367.html, accessed 1 April
2022.
92. “Country Profiles,” About the Belt and Road, HKTDC.com, Hong Kong Trade Development
Council, as of 18 July 2022. beltandroad.hktdc.com/en/country-profiles, accessed
5 Aug. 2022.

93. Yifan He, interviewed via Zoom by Oriol Caudevilla, 22 Dec. 2021.
94. “Blockchain-based Service Network,” Technical White Paper, BSN Base, BSN Development
Assoc., 25 April 2020. www.bsnbase.com/p/main/serviceNetworkDesc?type=WhiteBook,
95. BSN, “Blockchain Technology: A Game Changer for Global Trade,” Blockchain Thought
Leadership Blog, Medium.com, 11 March 2022. medium.com/blockchain-thought-
leadership/blockchain-technology-a-game-changer-for-global-trade-637f6fdbb15f,
accessed 13 March 2022.
96. Loïc Lesavre, Priam Varin, and Dylan Yaga, “Zero-Knowledge Proofs,” Computer Security
Resource Center, National Institute of Standards and Technology, US Dept. of Commerce,
Feb. 2021. csrc.nist.gov/glossary/term/zero_knowledge_proof, accessed 15 July 2022.
97. Blockchain-based Service Network User Manual, v1.6.0, BSN Base, Red Date (Hong Kong)
Technology Ltd., modified 31 July 2021. bsnbase.io/static/tmpFile/bzsc/index.html;
“Blockchain-based Service Network,” Technical White Paper, BSN Development Assoc.,
25 April 2020. www.bsnbase.com/p/main/serviceNetworkDesc?type=WhiteBook;
and Peter Catterall, “China Aims to Become Global Leader in Blockchain by 2025 as
Cryptocurrency Crackdown Widens,” PanDaily, 9 June 2021. pandaily.com/china-aims-
to-become-global-leader-in-blockchain-by-2025-as-cryptocurrency-crackdown-widens,
98. Fisco BCOS, rev. a4970502, 2019. fisco-bcos-documentation.readthedocs.io/en/latest/
docs/introduction.html#, accessed 20 Jan. 2022.
101. “Exploring Tokenised Assets: Collaborative Innovation in Action,” News, SWIFT,
21 Dec. 2021. www.swift.com/news-events/news/exploring-tokenised-assets-
collaborative-innovation-action, accessed 15 July 2022.
102. Kate Duguid and Nikou Asgari, “Central Banks Look to China’s Renminbi to Diversity
Foreign Currency Reserves,” Financial Times, Financial Times Ltd., 30 June 2022. www.
ft.com/content/ce09687f-f7e5-499a-9521-d98cbd4c5ac1, accessed 18 July 2022.
103. Kate Duguid and Nikou Asgari, “Central Banks Look to China’s Renminbi to Diversity
Foreign Currency Reserves,” Financial Times, Financial Times Ltd., 30 June 2022. www.
ft.com/content/ce09687f-f7e5-499a-9521-d98cbd4c5ac1, accessed 18 July 2022.
104. At the end of June 2022, China held $30.7 billion in foreign exchange reserves. “Official
Reserve Assets,” State Administration of Foreign Exchange, People’s Republic of China, 2
July 2022. www.safe.gov.cn/safe/2022/0207/20625.html; “Currency Composition of the
Official Foreign Exchange Reserves,” IMF.org, International Monetary Fund, updated
30 June 2022. data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A4, accessed
18 July 2022.
105. Carol R. Goforth, “What Does the Decline in the US Dollar’s Global Role Mean for
Cryptocurrencies?” Saint Louis University Law Journal 66, No. 2 (Winter 2022): 245–266.
scholarship.law.slu.edu/cgi/viewcontent.cgi?article=2288&context=lj, accessed
15 July 2022.
106. Vita Spivak, “Can the Yuan Ever Replace the Dollar for Russia?” Carnegie Moscow Center,
2 Aug. 2021. carnegiemoscow.org/commentary/85069, accessed 18 Dec. 2021.
107. Vita Spivak, “Can the Yuan Ever Replace the Dollar for Russia?” Carnegie Moscow Center,
2 Aug. 2021. carnegiemoscow.org/commentary/85069, accessed 18 Dec. 2021.
108. “Sanctions Programs and Country Information,” US Department of the Treasury, United
States, as of 18 July 2022. home.treasury.gov/policy-issues/financial-sanctions/sanctions-
programs-and-country-information. The sanctions lists involved 16 countries for different
reasons.
109. “ECB Publishes the Results of the Public Consultation on a Digital Euro,” Press Release,
European Central Bank, 14 April 2021. www.ecb.europa.eu/press/pr/date/2021/html/ecb.
pr210414~ca3013c852.en.html, accessed 19 July 2022.
110. Sriram Darbha and Rakesh Arora, “Privacy in CBDC Technology,” Staff Analytical Note
2020-9, Bank of Canada, June 2020. www.bankofcanada.ca/2020/06/staff-analytical-
note-2020-9, accessed 19 July 2022.
Financial Markets, and Bank of International Settlements, 21 Oct. 2021. YouTube, www.
youtube.com/watch?v=8tmp_dy-Ba8, accessed 15 July 2022.
Financial Markets, and Bank of International Settlements, 21 Oct. 2021.
Financial Markets, and Bank of International Settlements, 21 Oct. 2021.
Day 1, DC Fintech Week 2021; and Suyan Chen, “Progress of Research and Development
of E-CNY in China,” Working Group on E-CNY R&D, PBOC, 16 July 2021.

115. “Ex Digital Yuan Leader: China Can Monitor Payments Without a CBDC,” Ledger Insights,
Ledger Insights Ltd., 31 May 2021. www.ledgerinsights.com/dbs-bank-issues-blockchain-
bond-as-security-token, accessed 20 July 2022.
116. Mohammad Davoodalhosseini, Francisco Rivadeneyra, and Yu Zhu, “CBDC and Monetary
Policy,” Staff Analytical Note 2020-4, Bank of Canada, Feb. 2020. www.bankofcanada.
ca/2020/02/staff-analytical-note-2020-4, accessed 20 July 2022.
117. Mohammad Davoodalhosseini, Francisco Rivadeneyra, and Yu Zhu, “CBDC and Monetary
Policy,” Staff Analytical Note 2020-4, Bank of Canada, Feb. 2020. www.bankofcanada.
ca/2020/02/staff-analytical-note-2020-4, accessed 20 July 2022.
118. Euny Hong, “How Does Bitcoin Mining Work?” Investopedia, Dotdash Meredith, updated
5 May 2022. www.investopedia.com/tech/how-does-bitcoin-mining-work, accessed
19 July 2022.
119. Euny Hong, “How Does Bitcoin Mining Work?” Investopedia, Dotdash Meredith, updated
5 May 2022. www.investopedia.com/tech/how-does-bitcoin-mining-work, accessed
19 July 2022.
120. “Comparisons,” University of Cambridge Bitcoin Electricty Consumption Index, Cambridge
Centre for Alternative Finance, as of 20 July 2022. ccaf.io/cbeci/index/comparisons,
121. “Bit Late for Bitcoin: How China’s Crackdown Is Reducing More Emissions than Whole
Countries Emit,” Press Release, Rystad Energy, 14 July 2021. www.rystadenergy.com/
newsevents/news/press-releases/bit-late-for-bitcoin-how-chinas-crackdown-is-reducing-
more-emissions-than-whole-countries-emit, accessed 9 March 2022.
122. “Outline of the 14th Five-Year Plan for Economic and Social Development (2021–2025) and
Long-Range Objectives through the Year 2035 of the People’s Republic of China,”
March 2022. en.ndrc.gov.cn/policies/202203/P020220315511326748336.pdf, accessed
20 July 2022.
123. PBOC, CAC, MIIT, SAIC, CBRC, CSRC, and CIRC, “Announcement on Preventing Financial
Risks from Initial Coin Offerings,” Communication, People’s Bank of China, 4 Sept. 2017.
www.pbc.gov.cn/goutongjiaoliu/113456/113469/3374222/index.html, accessed
24 Nov. 2021.
124. “Blockchain: New Order of Value Interconnection,” Dialogue, Pulse Blockchain, CCTV
Finance, 2018 China International Big Data Industry Expo, Guiyang, 26 May 2018,
uploaded 3 June 2018. YouTube, web.archive.org/web/20181208010330/https://www.
youtube.com/watch?v=PeCTHcAQ_ho.
125. “China Should ‘Seize the Opportunity’ to Adopt Blockchain: President Xi Jinping,” CAN
(Channel News Asia), 18 Nov. 2019. YouTube, www.youtube.com/watch?v=ekkiuQcuD1A,
accessed 27 Nov. 2021.
126. Shanghai Newsroom, “China Urges Banks, Alipay to Crack Down Harder on
Cryptocurrencies,” Reuters, Thomson Reuters Corp., 21 June 2021. www.reuters.
com/technology/chinas-central-bank-urges-financial-institutions-crack-down-
cryptocurrencies-2021-06-21, accessed 7 Dec. 2021.
127. Wolfie Zhao, “Starbucks, McDonald’s Among 19 Firms to Test China’s Digital Yuan:
Report,” CoinDesk, Digital Currency Group, 23 April 2020, updated 14 Sept. 2021. www.
coindesk.com/business/2020/04/23/starbucks-mcdonalds-among-19-firms-to-test-chinas-
digital-yuan-report, accessed 23 March 2022.
128. Pindar Wong, interviewed via Zoom by Oriol Caudevilla, 11 Feb. 2022.
129. Ananya Kumar, “A Report Card on China’s Central Bank Digital Currency: The e-CNY,”
Econographics Blog, Atlantic Council, 1 March 2022. www.atlanticcouncil.org/blogs/
econographics/a-report-card-on-chinas-central-bank-digital-currency-the-e-cny,
accessed 15 March 2022.
130. Emily Kilcrease, Jason Bartlett, and Mason Wong, “Sanctions by the Numbers: Economic
Measures against Russia Following Its 2022 Invasion of Ukraine,” CNAS, Center for a
New American Security, 16 June 2022. www.cnas.org/publications/reports/sanctions-by-
the-numbers-economic-measures-against-russia-following-its-2021-invasion-of-ukraine,
131. Hannah Lang, “Republican Senator Urges US to Monitor China’s Digital Yuan Push
During Olympics,” Reuters, Reuters News & Media Inc., Thomson Reuters Corp., 4 Feb.
2022. www.reuters.com/world/us/republican-senator-urges-us-monitor-chinas-digital-
yuan-push-during-olympics-2022-02-04; and Senator Bill Cassidy, “Cassidy, Blackburn
Introduce Bill to Crack Down on China’s Digital Currency,” US Senate,
9 March 2022. www.cassidy.senate.gov/newsroom/press-releases/cassidy-blackburn-
introduce-bill-to-crack-down-on-chinas-digital-currency, accessed 23 March 2022.
132. Ningwei Qin, “Digital Yuan Pilot Attracts Chinese Province Bordering Russia,” Forkast
News, Forkast Ltd., 23 Feb. 2022. forkast.news/headlines/digital-yuan-chinese-province-
border-russia, accessed 23 March 2022.

blockchainresearchinstitute.org

Digital Yuan Cross Border Payments Are Coming 1677689420

Uploaded by

Copyright:

Available Formats

Digital Yuan Cross Border Payments Are Coming 1677689420

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Digital Yuan Cross Border Payments Are Coming 1677689420

Uploaded by

Copyright:

Available Formats

THE DIGITAL YUAN AND

Oriol Caudevilla and Henry M. Kim

A BLOCKCHAIN RESEARCH INSTITUTE LIGHTHOUSE CASE STUDY

Our findings, conclusions, and recommendations are initially proprietary to

Blockchain Research Institute, 2022

Except where otherwise noted, this work is copyrighted 2022 by the

To request permission for remixing, transforming, building upon

The recent crypto market crash—triggered by the de-pegging

The digital yuan’s debut startled US lawmakers enough to act against

Meanwhile, the disappearance of depositors’ hard-earned savings

3 © 2022 BLOCKCHAIN RESEARCH INSTITUTE

to root out the alleged gangsters and grifters in China’s banking

4 © 2022 BLOCKCHAIN RESEARCH INSTITUTE

» The domestic and cross-border tests proved so successful that

» Western policymakers have expressed concerns over China’s

Introduction to the digital yuan

China is not alone in its exploration of digital currencies. In 2020, the

5 © 2022 BLOCKCHAIN RESEARCH INSTITUTE

the process of launching its digital sand dollar.10 In a follow-up survey

Leadership with a sense of urgency

6 © 2022 BLOCKCHAIN RESEARCH INSTITUTE

In 2014, the Chinese government began its blockchain research in

The role of blockchain in China’s digital yuan

7 © 2022 BLOCKCHAIN RESEARCH INSTITUTE

» In the core layer of Project Inthanon-LionRock prototype

» In the digital yuan issuance layer, as in the mCBDC project.

» In trade finance, as in the proof of concept (POC) linking Hong

We also spoke with Pindar Wong, chairman of VeriFi (Hong Kong)

8 © 2022 BLOCKCHAIN RESEARCH INSTITUTE

Wong is an Internet pioneer: he co-founded the first licensed

Whether China will integrate blockchain technologies into its digital

The features of the DCEP system

For financial inclusion, the system requires no bank account or

Regarding privacy, users of integrated circuit cards will be relatively

9 © 2022 BLOCKCHAIN RESEARCH INSTITUTE

numbers, under China’s Personal Information Protection Law that

Figure 1: Digital yuan wallet screenshots

Open a wallet Check balance Make payment Receive yuan

10 © 2022 BLOCKCHAIN RESEARCH INSTITUTE

The digital yuan will be an effective tool when promoting financial

Outside China, the situation may be different. In the report, “China´s

Cross-border payments using DCEP can give rise to many

Furthermore, they cited multiple policy “unknowns” in relation to

» CNY is renminbi used on mainland China only, whereas

The authors of that report (Olsson, Fei, McCormack, Yu, and

11 © 2022 BLOCKCHAIN RESEARCH INSTITUTE

test of how those traveling into China or otherwise engaging with

Timeline and the development process

In 2016, the PBOC set up its Digital Currency Institute (数字货币研究所)

From 2018 to 2020, the PBOC and participating institutions developed

On 14 August 2020, China took a step further: its Ministry of

12 © 2022 BLOCKCHAIN RESEARCH INSTITUTE

The government designed these pilots to test system stability,

Starting in November 2020, Shanghai, Hainan, Changsha, Xi’an,

As of 30 June 2021, users had applied e-CNY in over 1.32 million

Table 1: DCEP trials across China

June 2021 Beijing ¥40 million 200,000 N/A

May 2022 Shenzhen ¥30 million ~285,000 Meituan

13 © 2022 BLOCKCHAIN RESEARCH INSTITUTE

shopping, and government services. Individuals and organizations