China will not be pressured into raising the limit on the amount of money that can be held within its central bank digital currency even in the face of a financial crisis, according to the head of its e-CNY department within the central bank. Use of the yet-to-be launched digital yuan is currently limited to 11 cities plus inside venues used for the ongoing Winter Olympics as part of a pilot programme, which will soon also include Hong Kong . In China, bank deposits of up to 500,000 yuan (US$78,540) are protected under an insurance system, meaning customers would not need to move their money from traditional banks to the digital yuan in the event of a financial crisis or bank run, according to Mu Changchun, director general of the Digital Currency Institute at the People’s Bank of China. The e-CNY will not have any material negative impact on the current financial system Mu Changchun “The e-CNY will not have any material negative impact on the current financial system, and we don’t expect during a stress scenario that we will need to remove those caps,” Mu said during an online panel discussion held by the Washington-based think tank Atlantic Council’s GeoEconomics Centre on Wednesday. “For the general public, even in a stressful scenario, the general public will have no incentive to move a large chunk of their deposits from the financial intermediaries or the financial institutions to the e-CNY system. “Politically, we don’t have the pressure to remove the restrictions. Personally, I’m very confident we can guarantee or safeguard those restrictions even in a very difficult situation. “We adopt the policy that we mainly pay no interest. We could also introduce a potential fee to charge for large or frequent withdrawals from the e-CNY system during distress or stressful scenarios.” How close is China to launching its digital currency? More than 260 million virtual wallets were in use as of the end of December – more than double the total in August. Additional cities will be added to the pilot programme, with 1.3 million merchants accepting payments in the digital yuan. A total of 470 million yuan (US$73.9 million) is currently held in electronic wallets, but this is just a “very small percentage of monetary supply” compared with 8.6 trillion yuan in traditional currency in either general circulation in the hands of the public or in the form of commercial bank deposits, Mu added. “We’ve greatly encouraged citizens to use e-CNY,” Mu said. “It will reduce the burden on the real economy and improve the business environment.” China to ‘prudently advance’ digital currency, improve design and use Mu confirmed a recent event held by Chinese shopping platform Meituan attracted 9 million people to sign up for a programme that offered rewards for using the e-yuan for bike rentals and public transport as part of an effort to reduce carbon emissions. Alipay and WeChat Pay, sometimes referred to as TenPay, are already major players in China’s electronic payment sector. But Mu insisted that the introduction of the digital yuan will not reduce their market share as it is a currency, compared with the wallets offered by Alipay and WeChat Pay, which are already both part of the digital yuan ecosystem, he added. The e-CNY can offer a backup in extreme scenarios like connectivity and power shortage Mu Changchun Alipay and WeChat, though, are not allowed to be used inside the venues for the ongoing Winter Olympics in Beijing, as Visa is an official sponsor. “Alipay and TenPay seem to have already become significantly important [parts of the] financial infrastructure, and if anything bad happens to them – either financially or technically – that will bring a significant negative impact to the financial system. This is the case when Alipay and TenPay are not allowed inside the Winter Olympics venues,” Mu added. “But since the e-CNY has official tender status, it is available in the Winter Olympics venue and offers various kinds of wallets for the audience and the athletes to take advantage of the mobile payments in China. “This is the same in other pilot cities when the e-CNY can offer a backup in extreme scenarios like connectivity and power shortage.”