An official from China's foreign exchange regulatory body has suggested the potential use of "programmable features" within China's Central Bank-Backed Digital Currency (CBDC) to bolster the effectiveness of monetary policy tools.
China, alongside several other nations, is diligently working on the development of CBDCs, digital tokens issued and regulated by central banks, although their widespread adoption remains in its early stages.
At present, CBDCs predominantly serve as M0 currency, akin to physical cash in circulation.
However, Lu Lei, the Deputy Administrator of the State Administration of Foreign Exchange (SAFE), has proposed that central banks could harness the programmable attributes of CBDCs to elevate their status to M2 currency, encompassing deposits and savings, Reuters reported.
The idea behind "programmable features" in CBDCs revolves around their inherent flexibility.
This involves the capacity to set parameters that can be altered, allowing for a range of possibilities. For instance, money could be programmed to have an expiration date or be limited in its utilization for specific purposes.
Lu Lei has further envisioned the People's Bank of China (PBOC) exploring the potential of these programmable features to adjust interest rates within the CBDC framework.
The adaptability of CBDCs, as highlighted by Lu, could also be used for macroeconomic management, offering central banks more tools to fine-tune economic stability.
Cross-border transactions are another domain where CBDCs exhibit significant promise. According to Lu, utilizing CBDCs for cross-border payments can substantially enhance the safety, convenience, and inclusivity of such transactions.
Chinese state-owned banks have been actively participating
Read more on cryptonews.com