The apex financial institution in China, the People’s Bank of China, has issued a new directive that mandates that commercial banks to pay interest on e-CNY (digital yuan) wallet balances. More so, the China Financial Times, an affiliate of the country’s central bank, reported the development on Monday.
According to the article, the yield-bearing initiative is part of the central bank’s new framework for e-CNY. As revealed the new framework is titled “Action Plan on Further Strengthening the Digital RMB Management Service System and Related Financial Infrastructure Construction.”
Through the new regulation, China aims to expand the use of the token and develop the needed infrastructure. Also, the PBOC aims to make commercial banks in the country regard the digital yuan as part of their asset-liability operation.
Furthermore, the China Financial Times cited the deputy governor of the People’s Bank of China, Lu Lei. The deputy governor said the new framework will promote the token from the virtual cash era to the digital deposit currency era.
Also, Lu Lei mentioned how the digital RMB has the functions of “monetary value scale, value storage, and cross-border payment.”
China maintains a ban on crypto, stablecoin to support digital yuan adoption
Despite the push for the virtual RMB, crypto and stablecoins transactions remained banned in Mainland China. Capitalizing on their absence, the central bank of China has aggressively promoted its CBDC and put in place a framework for regulatory clarity.
This approach underlines how China is tapping into the efficiency of blockchain rails through its central bank digital currency. Meanwhile, the United States of America on the flip side has supported the cryptocurrency and stablecoin market, allowing them to flourish.
Before the introduction of the framework, the PBOC in September inaugurated the RMB International Operations Center in Shanghai. The project is a blockchain services platform that aims to design on-chain settlement solutions and cross-chain transfer functionalities.
However, the central bank with the platform intends to expand the use of the CBDC in cross-border settlement. So far, the PBOC has argued that the digital yuan would improve financial inclusion.
On the flip side, commentators have so far registered their concern about the project giving more financial control to China’s central bank.
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