A senior official from China’s foreign exchange regulator has emphasized the potential benefits of “programmable features” in a central bank digital currency (CBDC) for enhancing the effectiveness of monetary policy tools. While China is among several countries actively developing their CBDCs, the adoption of these digital tokens by central banks is still in its early stages, with most CBDCs currently serving as M0 currency, or cash in circulation.
Lu Lei, the Deputy Administrator of the State Administration of Foreign Exchange (SAFE), stated during a forum that central banks could leverage the programmable features of CBDCs to extend their utility to M2 currency, which includes various forms of deposits and savings. Programmable features in a CBDC allow for customizable settings, such as setting an expiration date or restricting its use for specific purposes.
Lu anticipates that the People’s Bank of China (PBOC) may explore the use of these programmable features to adjust interest rates for CBDCs, thereby enhancing their utility in managing the macroeconomy. Additionally, he stressed the potential for CBDCs to improve cross-border payments by making transactions more secure, convenient, and inclusive.
Notably, Chinese state-owned banks participated in a trial related to cross-border CBDC transactions in collaboration with the Bank of International Settlements, demonstrating China’s commitment to advancing its CBDC initiatives on the international stage.
