Abstract

Current literature on central bank digital currencies (CBDCs) generally focuses on the regulatory issues in a domestic context. However, the expected international trial of Chinese CBDCs, issued by the world’s second-largest economy, undoubtedly deepens relevant regulatory concerns, which requires trenchant scholastic reviews. This paper aims to address three regulatory considerations relating to the cross-border use of CBDCs: (1) the anti-money laundering concern when financial authorities experiment CBDCs across multi-jurisdictions; (2) the Retail CBDC liquidity risks identification; and (3) the capital flow-in and settlements through future Wholesale CBDC. It attempts to point out the basic prerequisites and most significant risks, when China’s CBDCs flow beyond its borders. The paper posits China’s CBDCs, including both retail and wholesale scenarios, as a sample to present key legislative and regulatory challenges for global central banks and financial regulators. It intends to make a series of policy recommendations to facilitate the circulation of China’s CBDCs in international financial markets and to achieve the RMB Internationalization, such as constructing effective regulatory cooperation, conforming to bilateral currency transferring agreements, enforcing macro-prudential regulations, and revising the framework of settlement rules.