Decoding the rise of Central Bank Digital Currency in China: designs, problems, and prospects

During the Covid-19 pandemic, there has been a rapid shift in global transaction patterns from offline to online digital payment models, along with a growing interest in the development of Central Bank Digital Currencies (CBDCs) in various countries. This article spotlights the unexamined issue of digital currency regulation by examining the practice and related regulatory rules of the pilot CBDC in China. Beginning with the global design choices of digital currencies, the article comparatively examines the technical design of China’s CBDC, known as e-CNY. It further triggers a rethinking of conventional regulations for the protection of digital currency information by investigating the gap between the actual operation and design of e-CNY, as well as the gap between pilot policies and legal provisions such as the Cybersecurity Law, the Data Security Law, and the Personal Information Protection Law. This article argues that, on the one hand, the legislative balance between the protection of personal information and the regulation of illicit financial activities involved in the “loosely coupled account link” system of e-CNY should be reconsidered. On the other hand, the delineation of rights and responsibilities between dissemination institutions, payment service providers, and end-users needs to be further redefined and clarified.