Acceptance of China’s upcoming digital yuan mandatory

The acceptance of the Central Bank Digital Currency (CBDC) that is currently under development in China will be mandatory.

Local financial news outlet Financial News reported on Sept. 14 that the deputy governor of the People’s Bank of China (PBoC), Fan Yifei, explained that the upcoming digital currency will be part of the supply of the yuan renminbi’s paper notes and coins.

As a consequence of it being classified as part of the cash supply, the upcoming CBDC will have to comply with the laws that currently regulate cash. This includes the mandatory acceptance of the digital currency as a means of payment, he said:

“In accordance with the renminbi’s legal repayment provisions, digital renminbi is used to pay all public and private debts within the territory of our country, and no unit or individual may refuse to accept it if the conditions for acceptance are met.”

“You are anonymous until we want to check”

This may appear as a particularly unsettling threat to the privacy of its citizens, as under the system every transaction will go through the government. As Modern Consensus reported in mid-November of the last year, a PBoC executive explained that the digital currency will feature “controllable anonymity.”

Sonya Mann, communications manager of the Zcash Foundation, which supports the privacy-focused Zcash token (ZEC) said of the idea that “controllable anonymity is an oxymoron.” She said that “‘Controllable’ and ‘anonymous’ are fundamentally opposed” because “[i]f someone is anonymous, that means you don’t know who they are at all. No identity, no contact info.”

The exact classification that Yifei said the digital currency will fall into is M0 — also called Narrow Money — which includes cash and bank operational balances. Another consequence of this classification is that the CBDC will have to comply with laws and regulations such as large cash management, anti-money laundering, and anti-terrorist financing. 

From the perspective of the Central Bank, narrow money is a public product provided by the central bank to the general public. Because of this, it receives no interest and related services such as exchange and circulation will be completely free.

China’s CBDC is nearly ready

Chinese authorities are seemingly working hard to get the local CBDC out as soon as possible. As Modern Consensus reported in April, China started testing its digital currency in four cities, but last month it was expanded to Beijing, Hong Kong, Macau, and several provinces.

Mid-July reports also suggested that food delivery giant Meituan Dianping, ride-hailing firm Didi Chuxing, and streaming video company BiliBili were about to start testing China’s CBDC as well.