Emily Lee on Digitalization and Tokenization of Money: Exploring Central Bank Digital Currency Theories and Retail CBDC Developments in China (BFLR)

"Digitalization and Tokenization of Money: Exploring Central Bank Digital Currency Theories and Retail CBDC Developments in China"
Emily Lee
Banking and Finance Law Review, Vol. 41 No. 2, May 2025, pp. 271–300
Published in May 2025

Abstract: Central bank digital currencies (CBDCs) promote financial stability, inclusion and innovation in the digital economy. This article explores and reconceptualizes business management theories to enhance the understanding and characterization of CBDCs. From a theoretical standpoint, the governance, design principles and implementation of CBDCs align with institutional theory, stakeholder theory, technological innovation theory and open innovation theory. The interplay of these theories contributes to a comprehensive understanding of the interactions between CBDC stakeholders and the extensive array of opportunities and challenges presented by CBDCs. The theoretical frameworks are complemented by an examination of central banking legislation and monetary policy, as well as the potential impact on banking law and payment system regulations due to CBDC implementation, considering the significance of existing payment operators in facilitating CBDC distribution. In affording sufficient protection and in the interests of CBDC users, relevant issues in property law, data protection and privacy law are also considered. This article focuses on retail CBDCs, specifically China’s digital currency (e-CNY). As China’s central bank intends to cooperate with the G20 and other international organizations, e-CNY’s cross-border payments could have implications for monetary sovereignty, foreign exchange policies and regulatory compliance. China’s early e-CNY adoption serves as a vital case study for global central banks: CBDCs will likely have regulatory standards that reflect existing financial infrastructures and the ongoing US-China currency competition. This article aims to enhance understanding of legal challenges and practical concerns related to retail CBDCs, covering e-CNY’s core design features, CBDC’s impacts on existing laws, potential regulatory conflicts and competitiveness with existing payment systems. The article posits that account-based CBDCs can be considered a form of book money and can conform to the existing legal framework. Conversely, incorporating CBDCs into the present payment system necessitates recognizing token-based CBDCs as official payment methods, potentially requiring adjustments to pertinent legislation.

Full text of this article is available on SSRN, please click here.