China drafts law to legalize Digital Yuan, forbids competitors

China's PBOC is legalizing digital yuan. It has also issued a draft law that forbids the circulation of any yuan-pegged digital tokens.

By · Oct 30, 2020 . 5min read

China to legalize Digital Yuan news

China is coming closer to the launch of its CBDC, providing it with a legal foundation in an imminent law revision. The People’s Bank of China (PBoC) has issued a new law that attempts to legalize digital yuan while forbidding the circulation of yuan-pegged digital tokens. The move aims to outlaw any digital currencies that endeavour to contend with China’s CBDC.

Last week, China’s central bank also published a notice that it is accepting public feedback. It aims to review the drafted amendments until November 23. The draft law aims to revise the “Law of the People’s Republic of China on the People’s Bank of China”. This law has been in place running since December 27, 2003. The law defines the powers, mandate, organizational structure, and limitations of China’s central bank. The new draft law will formally legalize the DCEP (digital currency electronic payment) or China’s central bank digital currencies.

PBoC will monitor financial surveillance via Digital Yuan.

Although China’s central bank has led comprehensive pilot tests on the digital yuan, the new draft law will now present this as an official legal tender. It aims to outlaw any competitors to the digital yuan. The bill prevents any individuals or entities from reporting the yuan-pegged digital tokens that might substitute the digital yuan.

The draft law would also prevent any party from developing or issuing yuan-backed digital tokens to substitute the renminbi in the market. However, the bill also emphasizes the consequences of infringing the regulations. It states that on violating the regulations, the PBoC will prevent such actions. It will even abandon any proceeds from the production and sale of yuan-backed digital tokens. Moreover, it will include a penalty that is up to five times of the associated proceeds. Moreover, financial monitoring in China will be extremely controlled via the implementation of digital yuan.

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