近日，成都作为数字人民币（Digital Currency Electronic Payment, DCEP）试点城市，向公众发放了20万个DCEP红包，总金额达4000万元人民币，也成为了中国第四个进行相关试点的大型城市。根据商务部要求，DCEP还将陆续在南京、杭州、海南等28个省市，包括北京2022年冬奥会的各大场馆开放试点，“数字货币时代”或率先在中国降临。
2020年7月，最高人民法院和发改委联合发布的《关于为新时代加快完善社会主义市场经济体制提供司法服务和保障的意见》中第一次正式提到 “数字货币”。《意见》指出，中国将 “加强对数字货币、网络虚拟财产、数据等新型权益的保护”。该《意见》的发布使得数字货币首次被纳入司法保护范畴。
樊律师也提出，DCEP的推出对于支付市场和金融企业的发展“会有更多想象空间”。 “DCEP推出前，由于缺乏法定数字货币，而比特币等‘虚拟货币’不属于法定货币，不允许作为货币在市场流通，一些创新业务在技术层面缺乏支付工具，合规层面缺乏法律支持。” 她表示，“在DCEP推出后或许将会有很多创新业务涌现，活跃金融市场，从而服务实体经济。”
除此之外，他还对DCEP的中心化属性进行了解读。他告诉ALB，DCEP所采用的 “可控匿名” 使得虚拟数字货币的交易将有迹可循。因此，在处理好用户隐私和数据安全的前提下，对交易的追踪或能实现对货币数据的全方位监管，从而 “有效遏制金融、涉税、涉汇类犯罪，同时也更有利于打击灰黑产业” 。
Dawn of a Digital Currency Era
Chengdu, the fourth city to be a part of the pilot programme dubbed Digital Currency Electronic Payment (DCEP), recently distributed 200,000 DCEP red packets to its residents, with the total handout coming to 40 million yuan. According to the Ministry of Commerce requirements, the pilot tests are expected to expand to other 28 provinces and cities including Nanjing, Hangzhou, and Hainan, as well as the venues for the Beijing 2022 Winter Olympics. As a result, China may be the first country to embrace a “digital currency era.”
Chinese citizens recently received red packets containing an average of 200 yuan each, as part of a pilot to help them trial digital currency. The concept, however, is not new in China. Indeed, the country first explored the use of digital currency in 2014. However, COVID-19 brought about a renewed urgency. “Amid the pandemic and changes in the international political landscape, China has accelerated its pace in the launch of digital yuan, catering for the need to promote the internationalization of renminbi,” says Fan Xiaojuan, a partner of Zhong Lun Law Firm.
China is not the only country that is pushing this concept. A recent survey from Bank for International Settlement shows that, as of the end of 2020, 86 per cent of central banks globally had initiated efforts in exploring the use of digital currency, and at least 36 central banks have published reports on their progress. Further, 10 per cent of central banks have already launched digital currency pilot programs.
Liu Yang, a senior associate at DeHeng Law Offices, says however China’s DCEP push “adapts to the actual needs of people, and more importantly, it helps us maintain a leading edge compared to other countries in the area of digital currency,” thus providing a headstart going forward in the global competition.
According to the People’s Bank of China (PBoC), DCEP is the digital version of the yuan, China’s official currency, and as such only designated institutions are allowed to participate in its operations and exchange. Given that DCEP is a form of legal tender, Chinese laws governing cash may apply to DCEP to some extent.
DCEP, in essence, shares the same features as cash. But “the legal framework is yet to be built on DCEP, which is nowadays merely at law-making stage in China, and there is lack of legal foundation for its enforcement,” says Fan, adding: “We are confident that a clear-cut and sound legal system will be formed as pilot tests are rolled out in a larger scale.”
The term “digital currency” first appeared in an opinion jointly issued by the Supreme People’s Court and the National Development and Reform Commission promulgated in July 2020. The opinion states that China will “strengthen the protection of new rights and interests such as digital currencies, online virtual assets, and data,” and begins to provide digital currency with some judicial protection.
Of even greater concern is that in October of the same year, PBoC published the revised draft Law of the People’s Bank of China (currently soliciting public comment). “The draft stipulates in Article 19 of the previous law setting out ‘unit of renminbi’, that ‘renminbi includes both physical and digital forms,’” Fan says. “Such revisions, once being effectuated, will provide the legal basis for the issuance of DCEP, as the Draft expressly stipulates that DCEP is an alternative form of the legal currency.” Moreover, the draft reiterates that, other than DCEP, there is a wide prohibition on producing and selling digital tokens in replacement of renminbi.
Out of concerns that legal risks may arise from rapid developments of the DCEP, Liu advises that “only with efforts in striking a balance between efficiency with personal information protection, currency regulation with privacy protection can we serve the original intention at the time when DCEP was launched.”
DCEP will operate as a two-tiered system, under which PBoC issues and distributes the digital currency to commercial banks, and afterwards it distributes the same to the public. This system, says Liu Yang, poses no threat to deposits placed with commercial banks as it brings no change in either the existing currency distribution system or in the dual-account structure. Considering how it operates, DCEP is inseparable from commercial banks.
In addition to the four major state-owned commercial banks (i.e. Bank of China, the Industrial and Commercial Bank of China, the Agricultural Bank of China, and China Construction Bank), MYBank and WeBank will also be involved in the DCEP pilot tests. MYBank noted in a statement that as one of the institutions involved in researching and testing DCEP program, it would charge ahead with pilot tests in accordance with the scheduling arrangements of PBoC.
In Fan’s view, the fact that private banks have an equal start with state-owned banks for participating in DCEP pilot tests demonstrates that regulators are treating all market players equally by granting a chance for private banks to get involved in new types of business activities. By so doing, regulators are building a fair and orderly competition system within the bank sector. To make the most of such opportunities, private banks may bring catfish effect into full play, to stimulate innovations and improved service quality.
Liu adds that private banks with extraordinary strengths “supported by fintech giants are also capable of intensive piloting and promotion of DCEP in multiple areas and from different perspectives, which is undoubtedly more helpful for DCEP rollout.”
“MYBank and WeBank, with established market footprints, have built for a cashless payment landscape among their users. Getting private banks involved in DCEP makes the adaptation to a diversified payment ecosystem more viable, which helps charge ahead with DCEP program and guarantees a smooth and orderly transition of physical yuan to its digital form.”
—Fan Xiaojuan, Zhong Lun Law Firm
Fan shares the same view. “MYBank and WeBank, with established market footprints, have built for a cashless payment landscape among their users,” she says. “Getting private banks involved in DCEP makes the adaptation to a diversified payment ecosystem more viable, which helps charge ahead with DCEP program and guarantees a smooth and orderly transition of physical yuan to its digital form.”
BREAK THE DUOPOLY
China is now evolving into a cashless society, within which most payments are facilitated by the two fintech giants. The steady progress in DCEP pilot tests may be the first step China takes to curb the duopoly in the payment market, which may to some extent reshape the current ecosystem.
In Fan’s view, the launch of DCEP has indeed dealt a blow to the payment market as well as to the fintech firms. From legal and regulatory perspectives, “disorder competition did exist over the recent years in this industry. To tackle that, regulators shall perform their fundamental duties to ensure financial stability and prevent financial risks,” Fan says. “In the fintech supervision area, China will stand with an aim to maintaining fair market competitions.”
Liu tells ALB that DCEP also raises a practical concern to users. As DCEP is in essence cash in circulation, it does not generate interest, which is disadvantageous compared to Alipay and WeChat Pay, as the latter could render more diversified wealth management solutions. In some sense, however, strengths particular to DCEP are more sophisticated as opposed to Alipay and WeChat Pay, as DCEP “can be transmitted directly independent of bank accounts, cost-free and absent of internet connections.”
Fan also notes that the launch of DCEP avails “a larger room for imagination” to the development of the payment market and the financial sector. “Before DCEP is launched, China was in lack of legal digital currency, so innovations are therefore made impossible as they fall short of technical support (lack of payment tools) and legal foundations,” Fan says. “Innovations may increasingly emerge after DCEP is launched, which will revitalize the financial market and ultimately serve the real economy.”
Speaking of DCEP impact on the fintech firms, Liu believes the competition in future will occur in a shift from “payment channels” to “payment carriers:” Unlike Alipay and WeChat Pay, DCEP as a channel resides in “wallets.”
"In the coming years, the racetrack for fintech firms will be ‘wallets’, and whichever firms rendering quality and user-friendly ‘wallet’ services will get more traffic. In this regard, the existing ecosystem of fintech firms may be fully shifted to the DCEP sphere. DCEP derivatives will emerge and thus grow the user base.”
—Liu Yang, DeHeng Law Offices
“In the coming years, the racetrack for fintech firms will be ‘wallets’, and whichever firms rendering quality and user-friendly ‘wallet’ services will get more traffic. In this regard, the existing ecosystem of fintech firms may be fully shifted to the DCEP sphere. DCEP derivatives will emerge and thus grow the user base,” according to Liu.
In addition, he gives an account of the centralized nature of DCEP. Liu tells ALB that DCEP utilizes “controllable anonymity,” making transactions of virtual digital currency trackable. As a consequence, as long as user privacy and data security are maintained, this may enable all transactions and data to be monitored, for purpose of “effectively curbing financial, tax and currency exchange crimes, and better combatting underground industries.”
Fan, however, raises her concerns about how these fintech firms can be compliant with the law in carrying out cross-border activities. As these firms are “significantly involved in cross-border transactions, in addition to strict compliance with domestic laws and regulations, they are also required to watch closely on changes in international rules, otherwise, they may face severe penalties, even ordered to wind up business operations.”
Liu agrees. He believes that DCEP developments may force fintech firms to be more strictly compliant with applicable laws, and this would make “firms that are intended to and capable of making a difference to grow stronger, while those self-alleged fintech firms with abusive acts and practices are certain to be washed out of the market.”
To contact the editorial team, please email ALBEditor@thomsonreuters.com