The digital yuan or E-CNY, the first digital currency issued by a major economy, was designed for retail transactions and not to replace the US dollar, said Zhou Xiaochuan, president of the China Society for Finance and Banking, according to a report of China Daily. He added that the entire digital currency model aims to reduce friction for merchants and individuals.
The digital yuan will only focus on retail transactions
Zhou said he believed the digital yuan would only focus on retail transactions and added that the People’s Bank of China (PBOC) “has conducted research and development of e-CNY as a substitute for cash. in circulation, showing that the PBOC expects the use of e-CNY to mainly focus on retail payments, especially bringing more convenience to people using the Internet and mobile Internet terminals.
Also known to be the former governor of the PBOC, Zhou said at the Tsinghua PBCSF 2022 Global Finance Forum on Saturday that the chances of the digital yuan being used for cross-border payments cannot be considered zero “but I believe that it will always focus on retail transactions, such as cross-border retail transactions,” he said.
Zhou said third-party institutions should generate higher standards in order to participate in the digital currency pilot program and should not try to avoid these standards through dishonest means.
Not a weapon
Zhou revealed that the existence of the digital yuan is not a threat to the dominance of the US dollar and he also added that “if the global financial payment or messaging systems slide into some sort of Cold War pattern, it will will cause harm to everyone.” He pointed to the use of SWIFT as a weapon to impose sanctions on a nation by other nations and the increased chances for victimized countries to find alternative financial messaging channels to conduct transactions, bypassing SWIFT. In such a scenario, a lot of damage could be observed.