Zhenyong Li

This article argues that legal and regulatory design—not technology alone—determines whether retail central bank digital currencies (CBDCs) narrow the structural inequalities that sustain financial exclusion. Drawing on China’s e-CNY, The Bahamas, Nigeria, Jamaica, and the European Union’s digital euro project, it identifies three interdependent regulatory levers: tiered know-your-customer/anti-money-laundering rules permitting low-value access under tight caps; domestic interoperability across CBDC providers, banks, and cash grounded in open standards; and robust offline capability with statutory settlement irrevocability. Cross-country evidence shows that legal-tender status alone does not sustain adoption; what matters is user value delivered through seamless interoperability, transparent fees, and frictionless cash-in and cash-out at par. This article translates these findings into enforceable interoperability duties, proportionate merchant-fee frameworks, and offline-specific settlement rules. It concludes that CBDCs advance inclusion only when tiering, interoperability, and offline functionality are integrated as a coherent legal package—and that absent such coherence, ostensibly inclusive instruments risk reproducing the exclusion they claim to address.

This entry explains how China’s e-CNY, the retail form of its Central Bank Digital Currency, translates three design choices into improved access, affordability, and reliability: (1) enabling wallet-to-wallet payments on the CBDC ledger with settlement upon payment (SUP); (2) ensuring seamless integration at checkout with existing QR-code systems and popular payment apps; and (3) providing users with practical control through credentials stored on their devices and managed by licensed operators. With payment finality clarified in law and a two-tier structure in place, offline payments can shift to a hybrid architecture. It blends account- and token-based functionality across online and offline settings, incorporates tiered identity verification, and supports low-cost solutions. In essence, e-CNY demonstrates that strategic decisions regarding settlement, interoperability, and user control can expand financial inclusion while maintaining robust regulatory safeguards.

In pursuit of a higher-quality post-pandemic economic recovery, Chinese authorities have accelerated the development of the e-CNY. This study posits that the e-CNY distinguishes itself from other payment instruments through its controlled anonymity, programmability, and non-interest-bearing attributes. By analyzing patents filed by the Digital Currency Research Institute of the People’s Bank of China between 2016 and 2023, the paper elucidates potential implementation strategies for these distinctive features. The findings suggest that the e-CNY may facilitate a zero-interest accrual model within the prevailing legal framework. Restricted authority access and the anonymity ensured by encrypted data further allow users to maintain a high degree of confidentiality. Additionally, conditional automatic transfers—a prominent function in the e-CNY’s smart contracts—mirror traditional automatic transfers for directed fund utilization without impeding the circulation of fiat currency. The People’s Bank of China has sought to thoughtfully integrate these functionalities into its Central Bank Digital Currency framework, aiming to minimize potential conflicts with existing legal standards. Instead of relying solely on extensive legislative revisions, China’s experience illustrates how deliberate and incremental CBDC design choices can reconcile regulatory compliance with innovative technological advancements.