The People’s Bank of China (PBoC) aims to make it illegal to create tokens based on its digital yuan. On Friday, the Chinese central bank issued a notice indicating that it’s conducting public participation to collect views from the public. It is on track to review the present banking regulations to make room for a digital yuan.
Some of the recommended changes include altering Article 19 Section 3 to encompass that the Renminbi can exist in both digital and physical forms. Additionally, the PBoC, in Article 22 Section 3, seeks public views to enhance the laws to prohibit the development of other tokens referenced to the digital yuan.
Specifically, it seeks to make it illegal to make digital yuan tokens that “replace Renminbi’s circulation in the market.”
The changes in the central bank laws also include the wrath an entity would face if they decide to contravene the proposed regulations. The first blow would be for such entities to stop operating immediately. Second, they will transfer all the profits made from such an activity.
Lastly, they will be fined five times the forfeited amount. The public has until Nov 23, 2020, to tender their views. Comments can be sent using channels specified in the PBoC notice.
Notably, the PBoC banking law under review has been in existence for 17 years now (since 2013). The law, as it is, only defines PBoC’s place in a fiat-driven financial ecosystem. However, in its notice, the Chinese central bank noted that the country’s laws allow continuous development of the financial sector. As such, the bank has, over time, spearheaded revisions to the central bank laws. And this is not an exemption.
Apart from changing laws governing the interaction with the country’s first digital yuan, other areas up for review include those meant to address financial risks and stabilize the country’s financial sector. This consists of the apex bank, which has a tighter grip on the country’s macro-prudential management and heightened oversight of its key financial institutions.
How it Went Down in Shenzhen
Interestingly, the move to solicit public comments came when China tested its central bank-backed digital currency. With the first testing phase complete, the bank may expand the trial to include other cities other than Shenzhen, which hosted the digital yuan pilot test.
In Shenzhen, $1.5 million worth of the digital yuan was issued to 50,000 residents. The recipients were chosen via a lottery. They received the tokens through a link sent on their mobile phones via text messages. The link directed them to a download page where they downloaded the e-yuan wallet. Spending the token was enabled in select stores across the city.