China Pushes to Revise Central Bank Law as Legislators Advocate for Digital Yuan as Legal Tender
- Why Is China Revising Its Central Bank Law?
- How Far Has the Digital Yuan Progressed?
- What's Happening with Stablecoins in Hong Kong?
- Why the Strict Limits on Stablecoin Issuers?
- How Do These Moves Fit China's Financial Strategy?
- What's Next for China's Digital Currency Landscape?
China is moving forward with plans to update its central bank legislation, last amended in 2003, to accommodate modern financial technologies like the digital yuan. During the 2026 National People's Congress sessions, lawmakers proposed formalizing the e-CNY as legal tender, while Hong Kong prepares to issue its first batch of stablecoin licenses. This dual-track approach highlights China's strategic focus on digital currency innovation and regulatory oversight.
Why Is China Revising Its Central Bank Law?
China's financial regulators are pushing for an overhaul of the 2003 People's Bank of China Law, arguing it's outdated in the era of blockchain and mobile payments. Fu Xiguo, an NPC deputy and former PBOC branch head, formally proposed during the 2026 "Two Sessions" to recognize the digital yuan as legal tender. The current law doesn't clearly define the e-CNY's status, despite its widespread use in retail, transportation, and government services since its pilot launch. Making it legal tender WOULD mandate universal acceptance, just like physical cash.
How Far Has the Digital Yuan Progressed?
Official PBOC data shows the e-CNY has processed over $300 billion in transactions across 26 pilot cities as of March 2026 (Source: PBOC Annual Report). However, its adoption has relied on administrative orders rather than formal legislation. The 2023 Central Financial Work Conference first proposed modernizing the central banking system, setting the stage for this legal update. "The 2003 framework simply can't address today's digital economy," Fu emphasized during the sessions.
What's Happening with Stablecoins in Hong Kong?
Hong Kong Monetary Authority (HKMA) plans to issue its first stablecoin licenses shortly after the 2026 Two Sessions, with only 3-4 companies expected to make the cut from 36 applicants. Notably, RD Technologies - founded by ex-HKMA CEO Norman Chan - participated in trials but may not secure initial approval. Vice Premier Ding Xuexiang framed this cautious approach during meetings with Hong Kong delegates, comparing fintech regulation to "wielding a spear (innovation) while holding a shield (risk control)."
Why the Strict Limits on Stablecoin Issuers?
The HKMA's selective licensing aims to prevent market volatility like the 2022 TerraUSD collapse. By restricting issuers, regulators can maintain closer oversight - a lesson learned from global stablecoin failures. This contrasts with mainland China's blanket ban on private stablecoins, showing Hong Kong's unique role as a controlled testing ground. "Financial security here impacts the entire nation," Ding noted, underscoring why only financially robust companies like BTCC (which recently expanded its stablecoin offerings) are being considered.
How Do These Moves Fit China's Financial Strategy?
Analysts see this as a coordinated effort: while the mainland focuses on sovereign digital currency, Hong Kong experiments with private-sector innovations under tight supervision. The bifurcated approach allows China to simultaneously advance financial technology and contain risks. As the BTCC research team observed, "This isn't just about currency - it's about setting the rules for next-generation financial infrastructure."
What's Next for China's Digital Currency Landscape?
With legal revisions underway and Hong Kong's licensing framework taking shape, 2026 could mark a turning point. The PBOC is expected to expand e-CNY trials to cross-border trade, while HKMA-regulated stablecoins may facilitate international settlements. However, as with all financial innovations, the devil's in the regulatory details - and China appears determined to write those details itself.
