People’s Bank of China Rolls out New Draft Law to Legalize Digital Yuan

China rolls out new draft laws that will make legal arrangements for digital yuan and warn private companies not to issue yuan-based stablecoins.

The People’s Bank of China (PBOC) publishes a draft bill in order to legalize incoming central bank digital currency (CBDC) known as digital yuan. It will deal with both digital and physical versions of digital yuan.

Warning to Third Parties

In a newly published draft, the central bank of China makes it clear that third parties, such as institutions or individual entities, are not allowed to issue an alternative of digital yuan. It will probe a legal case against those who want to replace central bank digital currency. Those, who try to issue a cryptocurrency, may face severe legal prosecution such as destruction of all tokens, heavy fines, confiscation of all profit, imprisonment, and criminal prosecution.

According to the People’s Bank of China, the new draft bill will be available until November 23, 2020, for public consultation.

China’s Progress in CBDC’s Launch

According to Chinese local news agencies, the Chinese authorities may launch digital yuan before the Beijing Winter Olympics in 2022. China has started various pilot programs for testing of central bank digital currency.  For instance, the People’s Bank of China distributed 200 yuan ($30) among 47,500 citizens in Shenzhen via a digital yuan payment system. The residents of Shenzhen can utilize state digital currency on 3,389 stores across the city. The digital payment system has received positive feedback from users due to high speed and offline nature.

The legal move to regulate CBDC on the part of the Chinese central bank is the latest one among central banks.

Some countries have some reservations and concerns about the launching of CBDC. For instance, the United States does not have a plan to roll out the digital dollar soon. However, the European Central Bank is working on digital euro such as research and development. Germany’s central bank board member, Burkhard Balz, explains digital euro would pose a great threat to the current financial system.

The Bank for International Settlements is working with various central banks to help create their central bank digital currencies.

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