High-level design of the experiment

The e-CNY project has adopted a two-tier model, whereby the PBC issues e-CNY to authorised operators, including eligible commercial banks, PSPs (in the name of their commercial bank arms) and telecoms operators (grouping with commercial banks). The authorised operators are responsible for providing exchange and circulation services to the general public. With the two-tier model, the general public can still access e-CNY through traditional financial intermediaries, which would not be crowded out in the process of digitalisation of the fiat money.

In terms of design features, the system provides tiered wallets with different thresholds in order to achieve synergies between anonymity, risk reduction and financial inclusion. Following the principle of “anonymity for small value and traceable for high value”, wallets with lower thresholds allow greater anonymity. As a result, e-CNY can more easily be rolled out into rural or disadvantaged areas where identification can be difficult. Wallets with higher thresholds follow respective customer due diligence procedures that ensure AML/CFT compliance. The e-CNY does not pay interest on its holdings because of quantitative restrictions, but also to avoid competition with bank deposits and to foster financial inclusion.

In terms of technology, the project uses a “hybrid architecture” with both distributed and centralised design, which enhances the resilience and scalability of the system and supports rapid growth in e-CNY transactions. Also, it has adopted a “long-term evolution” approach without any prescriptive technology path in advance, so new technological features can continuously contribute to the system. In terms of legal foundations, a general revision of the People’s Bank of China Law (draft) stipulates that Chinese currency includes both physical and digital forms, and thus will confirm the legal tender status of the e-CNY