China meets digital currency: E-CNY and its implications for businesses

Tue 07 December 2021

By Dr Xue BAI 


Central bank digital currency (CBDC), also known as sovereign digital currency and digital fiat currency, is the digital version of sovereign currency issued by an economy’s monetary authority. China is likely to be the first major economy to issue CBDC, which is termed as e-CNY, digital yuan, digital RMB and digital CNY in the context of China. China’s CBDC will be a cash-like liability of the central bank available to the public, businesses and foreign visitors. 

The possible implication of e-CNY has long been a question of great interest in a wide range of fields ranging from banking and data to trade. Questions have been raised about the e-CNY includes: how to understand e-CNY? What is unique about e-CNY? What does e-CNY mean for local and international businesses?  

To answer these questions, UNSW Law’s Herbert Smith Freehills China International Business and Economic Law (CIBEL) Centre’s Co-Director Professor Heng Wang, in his latest short article, explains China’s unique CBDC approach by providing an overview of the CBDC structure and practice. The article further explores some of the implications of e-CNY to international and local businesses including: 

  1. the interaction between e-CNY and bank accounts and mobile payment services; 

  1. possible cross-border payment by individuals and firms using e-CNY; 

  1. compliance issues (e.g., anti-money laundering and counter-terrorism financing controls, consumer protection and disclosure, data privacy, licensing and prudential conduct, interoperability with other currencies and systems), and relatedly the division of tasks between onshore and offshore entities; and 

  1. cash management and foreign exchange strategies. 

This short article has been published by Law Gazette, which is the official publication of the Law Society of Singapore. Full text of the article is available here. Heng has also co-authored an article titled “The Future of the International Financial System: The Emerging CBDC Network and Its Impact on Regulation” and its full text is available here

Professor Wang’s research may be found at ResearchGate, SSRN, Twitter @HengWANG_law, and LinkedIn.