Chinese FX Regulator Highlights Programmable Features in CBDCs

<p>An
official from China's foreign exchange regulatory body has highlighted the
potential benefits of "programmable features" within a central bank
digital currency (CBDC) to enhance the effectiveness of monetary policy tools.
China is actively developing its own CBDC. However, the adoption remains in its
early stages.</p><p>Unlocking Programmable Features' Limitless Potential</p><p>Lu
Lei, the Deputy Administrator of the State Administration of Foreign Exchange,
spoke at a forum and emphasized the programmable capabilities of CBDCs. He
stated that these programmable features could potentially expand the role of
CBDCs beyond M0 currency, traditionally associated with cash in circulation. </p><p>This
expansion would encompass M2 currency, which includes various forms of deposits
and savings. These programmable features are settings that can be adjusted,
allowing money to have expiration dates or restrictions for specific uses.</p><p>Lei suggested that the People's Bank of China might explore these programmable
features to fine-tune interest rates within the <a href="https://www.financemagnates.com/tag/cbdc/">CBDC</a>, which could further
contribute to the management of the macroeconomy.</p><p>Moreover,
Lei highlighted the potential of CBDCs for cross-border payments, as they can
make transactions safer, more convenient, and inclusive. He noted that last
year, Chinese state-owned banks participated in a trial, in collaboration with
the Bank of International Settlements, focused on cross-border transactions.</p><p>As
of the end of June, transactions using China's CBDC, known as the e-CNY, had
reached 1.8 trillion yuan (approximately S$339 billion). However, it's
important to note that the e-CNY in circulation represented only 0.16 percent
of China's M0 money supply, indicating that there is still ample room for
growth and adoption in the CBDC landscape.</p><p>The
exploration of programmable features in CBDCs and the growing transaction
volumes using the e-CNY underscore <a href="https://www.financemagnates.com/tag/china/">China</a>'s
commitment to innovation and modernization in its financial sector. As CBDCs
continue to evolve, they hold the potential to reshape monetary policy tools
and cross-border transactions, enhancing the efficiency and inclusivity of
financial systems.</p><p>DBS Launches Innovative e-CNY
Payment Solution for Chinese Merchants</p><p><a href="https://www.financemagnates.com">Finance Magnates</a> reported earlier that <a href="https://www.financemagnates.com/fintech/dbs-launches-cbdc-merchant-collection-solution-in-china/">DBS introduced a solution
enabling Chinese merchants to accept payments in e-CNY</a>. The initiative marks a significant development in facilitating
e-CNY transactions and enhancing financial services. DBS already executed the
first transaction for a Shenzhen-based catering company using this novel
platform.</p><p>The
e-CNY merchant collection solution streamlines payment settlement processes by
automatically depositing payments into merchants' e-CNY bank accounts. This
service is designed to function smoothly even in areas with limited internet
connectivity. It offers efficient financial reporting reconciliation. DBS's
digital platform, DBS IDEAL, provides access to these reports.</p><p>Ginger
Cheng, the CEO of DBS Bank in China, underlines the importance of integrating CBDC
collection and settlement methods into existing payment systems to support
businesses in China. The e-CNY has gained steady popularity. With over 13
billion e-CNY currently in circulation across 26 cities and 17 provinces in
China, it signals the growing adoption of CBDCs.</p><p>CBDCs,
unlike cryptocurrencies, are centrally regulated digital representations of
fiat currencies backed by a country's central bank reserves. DBS's involvement
in testing asset tokenization and DeFi, along with the Monetary Authority of
Singapore's initiatives in promoting safe and efficient digital asset networks,
reflects a broader trend in the financial sector toward digital transformation
and innovation.</p>

This article was written by Tareq Sikder at www.financemagnates.com.