The new project gives legitimacy to the digital yuan and may criminalize yuan-backed stablecoins issued by third parties.
China’s central bank, the People’s Bank of China (PBC), released a draft law on Friday that aims to provide the regulatory framework and legitimacy for the central bank’s upcoming digital currency (CDBC), the digital yuan.
The draft law states that the yuan is the official currency of the People’s Republic of China, whether in physical or digital form.
The draft law also appears to point to efforts to have digital yuan-backed coins issued by third parties, indicating that individuals and institutions are prohibited from making and issuing a Bitcoin Era designed to „replace“ the digital circulation of the yuan. This move would apparently criminalise all stablecoins backed by yuan not authorised by the state.
The sanctions against violators of this bill are severe: in particular, the confiscation of all profits, the destruction of all tokens and the imposition of a fine of not less than five times the illegal amount created, in addition to the possibility of criminal prosecution and a prison sentence.
The People’s Bank of China clarified that the draft of the new law is on the table for public consultation until November 23, 2020.
Previous news has indicated that China hopes to officially start issuing the digital Yuan before the Beijing Winter Olympics in February 2022. In addition, earlier this month, China conducted a major test of Shenzhen’s digital yuan payment system, with nearly 47,500 residents claiming 200 yuan (USD 30) each in digital currency which they then spent in 3,389 shops across the city.
This regulatory movement is also the latest in a global trend towards CBDs. The Bank for International Settlements told Cointelegraph that it worked with seven central banks to define the fundamental principles necessary for any publicly available CBD to help central banks meet their public policy objectives.