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 risks and challenges to the international monetary system, payment and clearing system, monetary policies, cross-border capital flow management and etc.

1.4 The international community pays close attention to central bank digital currency (CBDC) and is exploring CBDC options.

At the moment, many major economies are actively considering or advancing research and development of CBDC. According to the latest survey conducted by the Bank for International Settlements (BIS) on central banks in 65 countries or economies, about 86 percent have carried out researches on digital currencies. Meanwhile, the proportion of central banks that were performing experiments or developing a proof-of-concept prototype increased from 42 percent in 2019 to 60 percent in 2020. Publicly available information shows that, in recent years, central banks of the US, the UK, France, Canada, Sweden, Japan, Russia, Korea and Singapore as well as the European Central Bank have all disclosed their considerations and plans regarding CBDC in various ways. Some central banks have initiated or even completed preliminary trials.

2. Definition, objectives and visions

2.1 Definition of e-CNY

E-CNY is the digital version of fiat currency issued by the PBOC and operated by authorized operators. It is a value-based, quasi-account-based and account-based hybrid payment instrument, with legal tender status and loosely-coupled account linkage. It has the following connotations:

First, e-CNY is the fiat currency issued by the central bank. Firstly, e-CNY has all the basic functions of money, i.e., unit of account, medium of exchange and store of value. Same as the physical form of RMB, e-CNY is China's legal tender. Secondly, e-CNY is the digital version of China's fiat currency. Throughout history, the form of currency has evolved from objects, metal coins to banknotes. Such evolution of currency is a result of progress made in science and technology as well as evolution of economic activities. The issuance and circulation of e-CNY is identical with physical RMB, while the value of the former is transferred in a digital form. Thirdly, e-CNY is the central bank's liabilities to the public. Backed by sovereign credit, e-CNY has the status of legal tender.

Second, e-CNY adopts a centralized management model and a two-tier operational system. The right to issue e-CNY belongs to the state. The PBOC lies at the center of the e-CNY operational system. It issues e-CNY to authorized operators which are commercial banks, and manages e-CNY through its whole life cycle. Meanwhile, it is the authorized operators and other commercial institutions that exchange and circulate e-CNY to the public.

Third, e-CNY is mainly a substitute for cash in circulation (M0), and will coexist with physical RMB. Both e-CNY and physical RMB are the PBOC's liabilities to the