China’s digital yuan remains the benchmark for a major economy’s central bank digital currency (CBDC), and the Asian nation has been working with some of its allies to expand it beyond its borders. In the past week, some reports have indicated that the Chinese government has linked the e-CNY to over a dozen countries in Asia and the Middle East.
Elsewhere, Pakistan is accelerating its digital asset push, and this time, its top security agency has proposed a regulatory framework that seeks to stamp out money laundering and other crimes from the sector.
China’s CBDC expansion reports draw scrutiny
Over the past week, a few reports, which all seem to have originated in China, claimed that the People’s Bank of China (PBoC) had announced new partners for its CBDC. The partnerships revolve around integrating the digital yuan into over a dozen countries in Southeast Asia and the Middle East.
The reports, many of which have been taken down, claimed that the integration includes 10 members of the Association of Southeast Asian Nations (ASEAN) and 6 Middle Eastern countries. However, none of the reports point to any official announcement by the PBoC or the corresponding central banks.
The specific countries were not mentioned. However, if the reports were true, Hong Kong, Thailand, the UAE and Saudi Arabia would presumably be the first to integrate the CBDC. These four states are members of mBridge, a cross-border initiative that seeks to ease funds transfer using CBDCs.
The Bank for International Settlements (BIS) was also a primary member of the project but pulled out last November. BIS cited the project’s maturity as its reason for exiting, but insiders revealed concerns about the subversion of mBridge into a BRICS system, potentially making the heavily-sanctioned Russia a primary member.
mBridge also has over 30 observers, ranging from international organizations like the International Monetary Fund (IMF) and World Bank to central banks from Egypt, Qatar, Jordan, Kuwait and Bahrain. However, these have no direct involvement in the project. Most have yet to make notable strides in their CBDC development, a primary qualifier for mBridge.
While the new integrations may have been misreported, they point to a growing concern in the West over the potential of the digital yuan. Some have described it as “the largest threat to the West in the past 30 to 40 years.” Others have sounded a warning that China could use the CBDC to challenge the role of the U.S. dollar in global trade.
However, China continues to dismiss the claims. PBoC leaders have reiterated that the country is just preparing for a digitalized future and wants to ease payments for its people.
The former deputy governor of the PBoC, Li Bo, is among those who have dismissed the digital yuan’s threat.
“For the internationalization of the renminbi, we have said many times that it’s a natural process, and our goal is not to replace the U.S. dollar or other international currencies,” he stated four years ago.
Pakistan proposes FATF-aligned regulatory framework
In Pakistan, the country’s lead security and counter-intelligence agency has proposed a new regulatory framework for the country’s digital assets sector.
The framework is aligned with the recommendations of the Financial Action Task Force (FATF) and extends to digital assets and the platforms that handle them, from exchanges to wallets, a local outlet report.
Developed by a special task force under the Federal Investigation Agency (FIA), it focuses on compliance, from curbing money laundering and terrorism financing to prudential requirements and consumer protection.
The Pakistani government has invited feedback on the proposal from industry stakeholders and the general public. It will then table the framework in parliament, and if it sails through, it’s to be implemented in phases starting next year.
“This is a paradigm shift in how Pakistan views digital finance. The policy proposal seeks to strike a historic balance between technological advancement and national security imperatives,” commented FIA Director Sumera Azam.
Pakistan has a thriving Web3 ecosystem, with some local experts claiming the country has at least 15 million digital asset holders. However, it still lacks a comprehensive framework, which the Pakistan Crypto Council says has held the industry back. The Council, formed last year to spur adoption, has called for enabling regulations to allow local VASPs to compete with their offshore rivals.
Watch: Finding ways to use CBDC outside of digital currencies
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