Former PBOC Chief Urges Security Focus for China’s Digital Yuan

• The People’s Bank of China (PBOC) has been testing its digital currency, e-CNY, through public pilots since 2020.
• Zhou Xiaochuan recommends prioritizing security in developing CBDC.
• He also emphasized combating money laundering and arms trading, often facilitated by cryptocurrencies.

Zhou Xiaochuan, ex-governor of the People’s Bank of China (PBOC), advised developers of the nation’s central bank digital currency to prioritize security, cost-efficiency, and preventing illicit use.

In remarks at a Beijing forum, Zhou said security is especially crucial in finance and currency systems. He warned that as technology improves convenience, it can also enable abuse.

Zhou said a key focus should be combating money laundering and arms trading, often facilitated by cryptocurrencies. China needs safeguards against digital yuan exploitation by criminal elements.

PBOC has been testing its e-CNY

The PBOC has been testing its digital currency, known as the e-CNY, through public pilots since 2020. Zhou recommends retaining the two-tiered distribution model, with the PBOC issuing tokens and commercial firms providing access.

This dynamic framework can enhance innovation and service levels through competition, which is important for a large country, Zhou stated.

He also highlighted cross-border interoperability as a key area for digital currency development. This involves both technical and policy considerations.

As a former head of the central bank, Zhou’s guidance carries significant influence over the digital yuan rollout. His remarks signal that balancing utility and security will be crucial for e-CNY adoption.

China’s digital currency has already seen notable traction in trials. Ensuring it doesn’t enable unintended harm will be vital for sustainable mainstream acceptance going forward.