Yesterday, the Industrial and Commercial Bank of China (ICBC), the world’s largest bank, announced the launch of its digital yuan Smart Exchange service, which automatically sweeps money between a user’s bank account and China’s central bank digital currency (CBDC), and vice versa.
For a moment, consider conventional bank accounts. It’s pretty common to have excess balances on current accounts automatically transferred into a savings account without having to monitor the account. ICBC’s Smart Exchange service offers a similar solution for the digital yuan.
A key design choice of some CBDCs is not to be interest-bearing to avoid competing with commercial banks. This deliberately makes it less attractive to hold digital yuan over traditional cash deposits in a bank account.
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