Yao Qian, China’s former leader of digital currency research from 2014 to 2018, stated that the objective of a CBDC is not to monitor payments because it can already do so. He also pointed out that a central bank digital currency (CBDC) like the digital yuan could run on blockchains like Ethereum and Diem.

He also confirmed that eCNY is a CBDC that has been synthesized. Because the central bank no longer employs him, the executive stated that his opinions are his own.

Qian’s speech included a reply to comments made by Federal Reserve Chairman Jerome Powell in late April. Powell stated that the Chinese government would monitor all payments in real-time using the digital yuan.

The digital yuan was not created to aid the government in monitoring real-time transactions, according to Qian. According to Sina Qian, who is currently a Director at the China Securities Regulatory Commission (CSRC), remarked, “In fact, third-party payment technology may already enable the transparency of all real-time transactions.”


Since 2018, barcode payments via WeChat Pay and Alipay wallets have had to be cleared through UnionPay, according to Ledger Insights, giving the central bank control.

UnionPay is China’s state-owned answer to Visa and Mastercard. The two major wallet providers’ other significant transactions include those involving banks and processed by NetsUnion Clearing, established by the People’s Bank of China.

As a result, the CBDC is motivated to offer an alternative to WeChat Pay and Alipay. The decline in cash due to the two leading private payment providers and the advent of decentralized digital currencies served as a “wake-up call.” “The People’s Bank of China was one of the first central banks to respond to the ‘Wake-up Call,'” Qian said, adding that the bank took action.

He went on to explain that degrading the currency status of the US dollar is “not necessarily the purpose of CBDC.” Rather, it’s a “natural progression of the digital process and market selection,” according to Qian.


CBDC Designs on Blockchain

Qian then discussed CBDC designs, saying that the two-tier system, in which a central bank issues a CBDC through commercial banks, is currently a popular way worldwide.

However, he does not believe that they are mutually exclusive, just as cabs and buses are separate modes of transportation.

“We can envisage that if the central bank’s digital currency runs directly on blockchain networks like Ethereum and Diem, the central bank could use their BaaS services to directly supply the central bank’s digital currency to users without the need for intermediaries,” Qian explained.

He also noted that this might assist reach those without bank accounts as part of a financial inclusion campaign.

He mentioned smart contracts in a distinct section of his speech. “Digital currency, in my opinion, cannot be a mere replica of physical currency. And, if the benefits of ‘digital’ are taken advantage of, the future digital currency will undoubtedly evolve into smart currency,” Qian said.

He did, however, mention smart contract “disasters” that occurred during early experiments, but attributed them to a lack of maturity. As a result, he recommended that the central bank begin with modest, smart contracts and gradually increase them as long as they are entirely secure.

An account-based digital currency option vs. a token-based digital currency is another design aspect that is considered mutually exclusive.

However, in Qian’s opinion, the partnership does not have to be all-or-nothing. Given the technology’s immaturity, China began with an account-based CBDC as a realistic solution. “Rather than taking a detour, we look forward to controlling the key to cryptocurrency,” he stated.

China sees its eCNY as a synthetic CBDC, as the central bank’s former governor has already stated.

The currency, not the central bank, is a liability of the state-owned bank that issues it. It is, nevertheless, fully backed by central bank deposits.

According to Qian, privacy, or the balance between digital identities, privacy issues, compliance, and social governance, is a topic that needs more research.

He mentioned that the digital dollar, euro, and yen appear to be gaining traction, and he wondered where the digital RMB stands in terms of competitiveness.

If you read between the lines, China’s rapid success in central bank digital currency is instructive to the rest of the globe. What can China learn from other central banks now that they are conducting research and technology is progressing?