<p>Zhou Xiaochuan, a former governor of the People’s Bank of China (PBOC), has issued a call for China to prioritize security and vigilance against potential misuse as it advances the development of its central bank digital currency (CBDC), known as the e-CNY.</p><h2 id="header-0">Safeguarding the CBDC ecosystem</h2><p>Xiaochuan made this<a href="https://finance.sina.cn/bank/yhpl/2023-10-13/detail-imzqxprt7849587.d.html?vt&#61;4&amp;cid&#61;76653&amp;node_id&#61;76653" rel="noopener noreferrer nofollow"> appeal</a> during the Digital Finance Forum, which was held in Beijing last week. He emphasized the necessity of safeguarding the CBDC ecosystem.</p><p>The PBOC has been actively engaged in trials and innovations related to the e-CNY, even rolling out a pilot application in January 2022. The digital yuan’s journey, however, comes with significant responsibilities, particularly in terms of security and prevention of misuse.</p><h2 id="header-1">Thwarting potential abuse</h2><p>Zhou acknowledged that in the realm of finance, security has always been a paramount concern, and this sentiment couldn’t be more accurate when applied to the realm of digital currency. He stressed that, as technology costs continue to decline and systems become more user-friendly, the risks associated with misuse also decrease. In this context, it becomes imperative for China to adopt stringent security measures and robust regulatory frameworks to thwart any potential abuse.</p><p>Zhou underscored the illicit utilization of cryptocurrencies and stablecoins in facilitating various activities, including arms trafficking and drug trade. He pointed out that addressing these issues necessitates a concentrated effort, making it clear that a proactive approach to prevention is essential.</p><p>The development of the e-CNY has seen impressive progress, with pilot projects initiated in 2019 and later expanded to 26 locations across 17 provincial-level cities and regions, including major metropolitan areas like Beijing, Shanghai, Shenzhen, and Suzhou.</p><p>Last month another official from the PBOC<a href="https://medium.com/&#64;coinness.gl/chinese-central-bank-official-emphasizes-need-for-digital-yuan-retail-payments-ec179793411d" rel="noopener noreferrer nofollow"> spoke to</a> the need to make the e-CNY accessible in all retail payment scenarios within China at a trade forum in Beijing. Digital yuan use is also being<a href="https://medium.com/&#64;coinness.gl/hong-kong-broadens-pilot-program-for-chinas-digital-yuan-3ea0209c88f" rel="noopener noreferrer nofollow"> broadened</a> to facilitate its availability in the special Chinese administrative area of Hong Kong.</p><h2 id="header-2">Proposing two-tier system</h2><p>Zhou advocated for a two-tier system in the operation of e-CNY, a structure already in place. The People’s Bank of China presides over the first tier, responsible for issuance and regulation, while the second tier comprises commercial institutions such as commercial banks, internet platforms, and telecommunications operators.</p><p>This dual-layered design promotes dynamic evolution within the digital currency landscape, enhancing service quality and fostering innovation through healthy competition. Zhou stressed the importance of exploring cross-border transactions, an area that entails both technological advancements and policy orientation.</p><p>Hong Kong has actively embraced e-CNY for cross-border payments, advancing into the second phase of technical testing and preparing to incorporate it into its predominantly local payment system.</p><p>On a related note, Lu Lei, the deputy administrator of the State Administration of Foreign Exchange (SAFE), highlighted the programmable features of CBDCs as tools for enhancing monetary policy effectiveness.</p><p>While current CBDCs are positioned as M0 currencies, strictly currency in circulation plus commercial bank reserve balances, he proposed that central banks could evolve them into M2 currencies. M2 is a measure of money supply that incorporates checking deposits and other forms of deposits that are readily convertible to cash, alongside cash itself.</p>

Former PBOC Governor: CBDC Development Must Focus on Security

Table of Contents

CoinNess Global

Other articles published on Oct 17, 2023

Fake BlackRock ETF news wipes $65m in BTC

Coinbase bets on USD delisting 80 pairs with USDT, BTC and EUR

Bitgert (BRISE) Price Prediction 2024, 2025, 2030, 2040, and 2050

Bitcoin Price Cycle Emphasis from Famous Analysts: Target for BTC Within Two Years is $130,000

South Korea’s Defense Industry Transformation Takes Center Stage at ADEX 2023

Bitcoin Technical Outlook: Short to Long-Term Analysis and Predictions

Join our free newsletter for daily crypto updates!