The world of finance is undergoing a profound transformation, with central bank digital currencies (CBDCs) emerging as a cornerstone of future monetary systems. As digital payment ecosystems evolve, questions around the internationalization of digital currencies, the distinction between digital money and digital assets, and regulatory clarity have taken center stage in global financial discourse.
At the 2021 Boao Forum for Asia, industry leaders and policymakers convened to discuss the future of digital payments and cryptocurrencies. Their insights shed light on China's progress with its digital currency initiative—Digital RMB—and provided a clear framework for understanding the role of assets like Bitcoin in the broader financial landscape.
The Evolution of Digital RMB: A Two-Tiered Approach
Digital currency development is no longer theoretical—it’s operational. The People’s Bank of China (PBoC) has been actively piloting its central bank digital currency, commonly known as e-CNY or Digital RMB, across multiple cities and use cases.
According to Li Bo, Deputy Governor of the PBoC, the pilot programs have yielded valuable lessons. One of the most significant design choices has been the adoption of a two-tier system, which integrates seamlessly with existing banking infrastructure. This model minimizes financial disintermediation risks by ensuring that commercial banks remain key intermediaries between the central bank and end users.
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This layered architecture supports controllable anonymity—a critical feature for balancing privacy and regulatory oversight. Small transactions can remain anonymous to protect user privacy, while larger transfers can be traced to prevent illicit activities such as money laundering or tax evasion. This balanced approach reflects a pragmatic vision for digital currency: one that enhances security without compromising civil liberties.
Moreover, the system is designed to be open and interoperable. The PBoC is exploring hybrid models that link digital wallets, bank accounts, and token-based systems. Such flexibility ensures compatibility across platforms and paves the way for broader adoption in both urban and rural economies.
Expanding Use Cases and Preparing for Internationalization
While domestic trials continue to expand, the roadmap for digital currency internationalization is also taking shape. The upcoming Winter Olympics in Beijing presents a unique opportunity to test cross-border usability. Officials plan to enable international visitors to access and use Digital RMB during the event, marking a crucial step toward global integration.
However, true internationalization requires more than just technical readiness—it demands cooperation, standardization, and mutual trust among central banks worldwide.
Agustín Carstens, General Manager of the Bank for International Settlements (BIS), outlined three potential pathways for global CBDC interoperability:
- Ensuring compatibility between different national digital currencies.
- Establishing technical interfaces through interconnected networks.
- Building a unified multilateral CBDC network to streamline cross-border payments.
These efforts are already underway. In February 2021, the Hong Kong Monetary Authority, the Bank of Thailand, the Central Bank of the UAE, and the PBoC’s Digital Currency Research Institute launched the m-CBDC Bridge project. This joint research initiative aims to explore how multiple central banks can conduct real-time, cross-border transactions using their respective digital currencies—potentially reducing settlement times from days to seconds.
Wachirawit Armrongdilok, Assistant Governor of the Bank of Thailand, emphasized the project’s long-term goal: to create a scalable, secure infrastructure that encourages wider participation from other central banks and enhances financial inclusion across regions.
Distinguishing Digital Currency from Digital Assets
As digital currencies gain legitimacy, it’s essential to draw a clear line between state-backed digital money and private digital assets like Bitcoin.
Zhou Xiaochuan, former PBoC governor and Vice Chairman of the Boao Forum, stressed that all financial innovations must serve the real economy. “We must distinguish between digital currency and digital assets,” he said. “Any new financial tool should demonstrate tangible benefits for productive sectors.”
Li Bo reinforced this view by clearly defining Bitcoin’s status: it is not a currency but an alternative investment asset—a form of encrypted digital property suitable for investment purposes, not everyday transactions.
This distinction is critical. While Digital RMB is legal tender issued by the central bank with full monetary functionality, Bitcoin operates outside traditional financial oversight. Its value is driven by speculation rather than intrinsic utility or institutional backing.
Regulatory Frameworks for Stability and Risk Control
With growing interest in cryptocurrencies comes increased scrutiny. Li Bo confirmed that Chinese regulators are actively developing rules for both Bitcoin and stablecoins.
Stablecoins, in particular, pose systemic risks if widely adopted without oversight. “If any stablecoin aims to become a widely used payment instrument,” Li Bo stated, “it must be subject to strict regulation—just like banks or quasi-banking institutions.”
Such regulations would focus on:
- Reserving requirements to ensure liquidity.
- Transparency in asset backing.
- Anti-money laundering (AML) compliance.
- Protection against market manipulation and investor harm.
These measures aim to prevent speculative bubbles and safeguard financial stability—especially as decentralized finance (DeFi) and crypto trading platforms grow in popularity.
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Frequently Asked Questions (FAQ)
Q: Is Digital RMB the same as Bitcoin?
A: No. Digital RMB is a central bank-issued digital currency backed by the Chinese government and legal tender. Bitcoin is a decentralized cryptocurrency with no governmental backing or intrinsic value.
Q: Can foreigners use Digital RMB?
A: Yes. During events like the Beijing Winter Olympics, international users were allowed to open non-resident wallets and use Digital RMB for purchases, signaling early steps toward cross-border usability.
Q: Does China allow cryptocurrency trading?
A: China prohibits financial institutions from offering crypto-related services and bans initial coin offerings (ICOs). While individuals may hold crypto privately, trading and mining are heavily restricted.
Q: What is controllable anonymity in digital currency?
A: It means small transactions are anonymous to protect privacy, while large transactions can be monitored by authorities to prevent fraud, tax evasion, or terrorism financing.
Q: Will Digital RMB replace physical cash?
A: Not immediately. The goal is coexistence—Digital RMB complements cash and electronic payments, especially in areas with limited banking access.
Q: How does the m-CBDC Bridge work?
A: It enables direct transactions between different central bank digital currencies using a shared platform, eliminating intermediaries and reducing costs and settlement time for cross-border payments.
The Road Ahead: Building Trust Through Innovation
The journey toward a digitized global financial system is complex but inevitable. China’s measured approach—prioritizing stability, inclusivity, and international collaboration—offers a model other nations can study.
As Digital RMB expands domestically and explores global applications, its success will depend not only on technology but also on policy foresight and public trust.
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Core keywords naturally integrated throughout: digital currency, central bank digital currency (CBDC), Digital RMB, Bitcoin, cryptocurrency regulation, cross-border payments, m-CBDC Bridge, controllable anonymity.
By maintaining a clear regulatory stance, investing in robust infrastructure, and fostering multilateral cooperation, central banks can lead the transition to a safer, faster, and more inclusive financial future—one where digital innovation serves the real economy, not just speculative markets.