The People’s Bank of China (PBoC), the central bank of China, is proposing a new banking law in which it is going to ban all of the digital tokens that are pegged to Yuan. While on the other hand, this proposed draft also included its central bank digital currency (CBDC) known as Digital Yuan whom the Chinese central bank wants to legalize. However, the central bank has asked for public feedback on this proposed banking law.
Chinese central bank has issued an official notice on October 23 saying that it is open to public comments regarding its draft law that proposes Yuan both in its physical as well as in its digital form. The People’s Bank of China will be seeking comments from the public till the 23rd of November.
Through this proposed draft law, the central bank of China is providing more legal clearance to the regulatory status of its centralized digital currency. PBoC is actually paving the way for Digital Yuan in the country by banning the issuance and circulation of all of the digital tokens pegged to Yuan. As per the draft law, only its central bank digital currency will remain pegged to it while making Digital Yuan the country’s official Yuan-pegged digital token.
As the document’s article 22, section 3 reads:
“To prevent risks associated with virtual currency, any other legal entity or individuals can not issue or sell tokens to replace the circulation of Renminbi.”
Furthermore, the central bank said that if anyone violated this regulation, the bank will suspend their activities. Also, the bank will charge “a fine of up to five times of the involved proceeds”, as per the draft document.
This proposed banking law has come at the time when the People’s Bank of China is making progress with its central bank digital currency project. It is successfully conducting pilot trials of the Digital Yuan across major cities of the country. This step taken by the Chinese central bank to prohibit the issuance and circulation of digital tokens in the country indicates that it is getting reading for rolling out digital yuan very soon.