(Yicai) Oct. 13 -- Security, convenience, the prevention of abuses and keeping costs low are major considerations when developing virtual currencies such as the digital Chinese yuan, a former governor of the People’s Bank of China said at a recent forum.

Security is a crucial concern for finance, especially currencies, said Zhou Xiaochuan, who served as governor of the central bank from 2022 to 2018 and is now vice chairman of the Boao Forum for Asia. The costs of abuse of digital currencies will become lower as the technology becomes cheaper and the system becomes more convenient.

Money laundering, arms trade, cross-border gambling and scams shall be clamped down heavily upon, Zhou said at the China Beijing Digital Finance Forum 2023 yesterday.

“We should also fully understand and adhere to the dual-layer operating system,” Zhou said. The central bank is the first layer of digital currency issuance while commercial entities, such as banks, internet platforms and telecom carriers, are the second layer.

Policy makers should lay down a pricing mechanism, which will allow e-payment platforms to charge for their services, Zhou said. Fees should be low, to reduce the impact on end users. But if there is no charging mechanism, service providers might abuse the system, treating it as a tool to attract network traffic instead of as a financial services instrument, he added.

Dynamic evolution is the system's core character, Zhou said. This will improve the level of services and the promotion of innovations through competition, while enhancing connectivity via diverse and co-existing developments. For example, commercial bodies can provide front-end services, with clearing institutes backed by central banks responsible for back-end supporting services, he added.

The PBOC has been rolling out the e-yuan since late 2019. As of June 30, there was CNY16.5 billion (USD2.3 billion) worth of digital yuan in circulation with a turnover of CNY1.8 trillion (USD246.3 billion), Yi Gang, another ex-PBOC governor, said recently.

Editor: Kim Taylor