Meanwhile, the PBOC will uphold the principle of having a two-tier and risk-free system in order to meet regulatory and compliance requirements of various countries.
3. Framework of design
The design of e-CNY system follows the concept of "safe and inclusive, innovative and user-friendly, and time-evolving." The principles for design are based on a holistic consideration of monetary functions, market demand, supply model, technological support, and cost-benefit. Studies are conducted and revised on currency properties, operating model, digital wallet ecosystem building, compliance and responsibilities, selection of technology roadmap, and regulatory system. This aims to deliver an open, inclusive, sound, and reliable e-CNY system design plan that suits China.
3.1 Principles for design
Compliance with laws and regulations. The institutional design of e-CNY system strictly complies with regulations on the administration of RMB, anti-money laundering and countering the financing of terrorism (AML/CFT), the administration of foreign exchange, and data and privacy protection. The operation of e-CNY should be included in the regulatory framework.
Safety and Convenience. The e-CNY system is based on broad accounts, loosely coupled with bank accounts and has its system of value. This makes it adaptive to various on-line and off-line payments. Difficulties resulting from limited technological literacy and telecommunications coverage are minimized to meet people's demand for safe and convenient payment instruments. The e-CNY operational system is highly secure, highly usable, and highly expandable and concurrent, which can ensure business continuity.
Openness and Compatibility. The PBOC leverages on the advantage and professional experience of authorized operators and aspires to keep technology up-to-date by promoting technological competition and upgrading in line with the principle of evolving with the time so as to avoid the excessive concentration of system operational risk. The e-CNY system supports interoperability with traditional electronic payment systems. It makes full use of existing financial infrastructures to
international monetary system. CBDC supplied by one central bank should not disrupt other central bank's currency sovereignty and their ability to fulfill its mandate for monetary and financial stability, and meanwhile should protect the legitimate rights of consumers and boost fair competition.
Second, compliance. Cross-border payments arrangements with CBDC should have a sound legal system and a stable operational system, comply with the regulations and laws of the jurisdictions concerned, such as capital management and foreign exchange mechanism. Information flow and fund flow could be synchronized, so as to facilitate the advancement of cross-border trade, bolster the development of real economy and meet the regulatory requirements for anti-money laundering and countering terrorist financing.
Third, interoperability. The development of CBDC should fully tap the role of the existing infrastructures and leverage Fintech so as to enable interoperability between CBDC systems of different jurisdictions as well as between CBDC systems and incumbent payment systems. In the meanwhile, its development should contribute to the orderly development of the payment system and guard against market fragmentation.
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