China Overhauls Central Bank Law as Lawmakers Push for Digital Yuan as Legal Tender

• Why Is China Revising Its Central Bank Law?
• Will the Digital Yuan Become Legal Tender?
• Hong Kong’s Strict Stablecoin Licensing Approach
• How Does the Digital Yuan Compare to Stablecoins?
• What’s Next for China’s Digital Currency?
• FAQ

China is revamping its 2003 Central Bank Law to accommodate modern financial technologies, with lawmakers formally proposing the digital yuan’s recognition as legal tender in 2026. Meanwhile, Hong Kong prepares to issue its first batch of stablecoin licenses, capping approvals at four firms. This article explores the implications of these moves, the growing adoption of the digital yuan, and Hong Kong’s cautious approach to stablecoins.

Why Is China Revising Its Central Bank Law?

Chinese regulators are pushing for an overhaul of the People’s Bank of China (PBoC) Law, arguing that the 2003 version is outdated in today’s tech-driven economy. During the 2026 National People’s Congress (NPC) sessions, Fu Xiguo, an NPC delegate and former head of the PBoC’s Liaoning branch, formally proposed recognizing the digital yuan (e-CNY) as legal tender. The current law, last amended in 2003, predates mobile payments and blockchain technology. Fu emphasized that the existing framework fails to address the digital yuan’s role, leaving its adoption reliant on administrative directives rather than formal legislation.

Will the Digital Yuan Become Legal Tender?

Fu Xiguo’s proposal highlights the need for legal clarity. If approved, the e-CNY WOULD gain the same status as physical cash, mandating acceptance by businesses and individuals nationwide. The PBoC has already rolled out the digital yuan across retail, transportation, and public administration sectors, but its usage remains pilot-based. The 2023 Central Financial Work Conference first proposed modernizing China’s central banking system, and 2026 could mark a pivotal step toward codifying the e-CNY’s legitimacy.

Hong Kong’s Strict Stablecoin Licensing Approach

While mainland China focuses on the digital yuan, Hong Kong is taking a measured step toward stablecoins. The Hong Kong Monetary Authority (HKMA) received 36 applications for stablecoin licenses but plans to approve only four in its first batch, expected shortly after the 2026 NPC sessions. Notably, RD Technologies, led by ex-HKMA chief Norman Chan, participated in testing but may miss the initial cut. During the NPC meetings, Vice Premier Ding Xuexiang stressed balancing innovation (the "spear") with financial security (the "shield"), underscoring Hong Kong’s role in safeguarding national stability.

How Does the Digital Yuan Compare to Stablecoins?

China’s centralized e-CNY contrasts with Hong Kong’s private-sector stablecoins, reflecting divergent regulatory philosophies. The PBoC retains full control over the digital yuan’s issuance, while Hong Kong’s licensed stablecoins will be privately issued but tightly supervised. This dual-track approach aims to mitigate risks like the stablecoin crashes seen globally in recent years.

What’s Next for China’s Digital Currency?

With the PBoC Law revision underway, 2026 could be a landmark year for the digital yuan’s formal adoption. Meanwhile, Hong Kong’s stablecoin rollout will test its "sandbox" regulatory model. As BTCC analysts note, these developments signal China’s broader strategy: state-backed digitization at home and controlled experimentation in Hong Kong.

FAQ

Is the digital yuan already in use?

Yes, the PBoC has piloted the e-CNY in sectors like retail and transport, but it lacks formal legal tender status.

How many stablecoin licenses will Hong Kong issue?

The HKMA will approve "no more than four" initially, with stricter oversight to prevent volatility.

Why revise the PBoC Law now?

The 2003 law doesn’t account for digital currencies or blockchain, necessitating updates to align with China’s tech-driven economy.