CBDC could be put into e-wallets for direct and peer-to-peer transactions

As the time is approaching when the digital currency from China's central bank is set to be unveiled, which may be the world's first, more experts are discussing the attributes of the new type of money based on details leaked by the authorized designer.

Central bank digital currency, or the CBDC, is a new form of money issued digitally by the central bank and to serve as legal tender－a country's sovereign currency. It has no physical form like cash, but is backed by the reserves of valuable assets that commercial institutions deposit in the central bank.

Like a token, the upcoming CBDC could be put into electronic wallets, supporting direct and peer-to-peer transactions. The "wallet" could be an app on a handheld device, such as a mobile phone, but the final design has not yet been settled, according to Mu Changchun, deputy director of the central bank's payments department.

"If China successfully issued the world's first CBDC, it will promote other countries to accelerate relevant studies and join the competition of creating CBDC," said Huang Yiping, director of the Institute of Digital Finance at Peking University.

Experts said, the announcement of Facebook's "Libra", the global social network's digital currency, has accelerated the PBOC's plan to issue its own digital money. And the Libra's designing scheme might have sparked new ideas among Chinese financial regulators.

Zhang Zhijun, lead security architect of the World Bank, told China Daily in an interview that some countries have undertaken pilots and explored some basic technology. "It still needs time to watch who will actually implement the digital currency plan, or in which specific form."

Fan Yifei, a vice-governor of the PBOC, wrote in an earlier article that the issuance system of Chinese CBDC will have two tiers－the central bank offers CBDC to authorized commercial institutions, and then the public can exchange it for digital currency from institutions.

The "double-tier structure" of the Chinese CBDC is practical and reasonable, which could play a leading role and provide some reference for other countries, said Zhang.

In terms of the cross-border usage, it could be a challenge for other countries' monetary authorities to accept Chinese CBDC. And it is a relatively difficult issue, which requires communication with foreign financial regulators, he added.

The CBDC could be seen as residents' deposits in the central bank's account, said Peng Wensheng, global chief economist with Everbright Securities.

As PBOC officials reiterated, the CBDC will replace bank notes and coins, or the cash in circulation (M0), and it is designed for retail payments at the early stage.