The 2.5 Tiers of China’s Digital Renminbi Explained


Domestic analysts say that China’s central bank digital currency, commonly referred to as the “Digital Renminbi,” actually involves the implementation of a 2.5 tier system, as opposed to the 2 tier system publicly outlined by senior officials.

In 2019 Mu Changchun (穆长春), head of the People’s Bank of China’s (PBOC) Digital Currency Research Institute, first announced that the Digital Renminbi would involve the implementation of a two-tier operating system.

“The People’s Bank of China will first exchange the Digital Renminbi with banks or other operating institutions, and these institutions will then exchange [the Digital Renminbi] with the public,” said Mu. “This is categorised as a dual-tier operating system.”

Under the scheme outlined by Mu PBOC would be responsible the first-tier of the system, while institutions in the second tier would include all of the big state-owned Chinese banks (Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, ICBC and Postal Savings Bank of China), as well as privately operated digital lenders such as Ant Group-backed MYBank and Tencent-backed WeBank.

According to Mu this two-tier arrangement would prevent an excessive amount of risk accumulating at any one institution, as well as satisfy the need for stable and reliable operation.

Some domestic analysts now point out, however, that the Digital Renminbi has actually evolved into a “2.5 tier” system since the official launch of trials in April 2020.

In an article published by China Electronic Banking Net, Wang Chao (王超) writes that this additional half-layer is comprised of smaller banks and non-bank payments entities such as Bank of Hainan, Bank of Changsha and Bank of Xi’an, as well as groups such as Didi Chuxing, Bilibili, JDD, UnionPay Merchant Services and Lakala Payment.

These groups are responsible for developing diversified applications and technologies, as well as providing fund transfer and payments and settlement services, all based on the Digital Renminbi wallets of the second-tier.

The 2.5 Tiers of the Digital Renminbi

Tier Entities Main Functions
1 The People’s Bank of China Issuance of the Digital Renminbi.
2 Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, ICBC, Postal Savings Bank of China, MYBank and WeBank To serve as “operating organisations” for the Digital Renminbi, responsible for exchanging the currency with members of the public.
2.5 Other commercial banks and non-bank payments platforms. These include Bank of Hainan, Bank of Changsha and Bank of Xi’an, as well as groups such as Didi Chuxing, Bilibili, JDD, UnionPay Merchant Services and Lakala Payment Developing diversified applications and technologies, as well as providing fund transfer and payments and settlement services, all based on the Digital Renminbi wallets of the second-tier.



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