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Architecting Inclusion in e-CNY: Settlement-Upon-Payment, Domestic Interoperability, and User Control: History
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Contributor: Zhenyong Li ,
Jianxing Li

This entry explains how China’s e-CNY, the retail form of its Central Bank Digital Currency, translates three design choices into improved access, affordability, and reliability: (1) enabling wallet-to-wallet payments on the CBDC ledger with settlement upon payment (SUP); (2) ensuring seamless integration at checkout with existing QR-code systems and popular payment apps; and (3) providing users with practical control through credentials stored on their devices and managed by licensed operators. With payment finality clarified in law and a two-tier structure in place, offline payments can shift to a hybrid architecture. It blends account- and token-based functionality across online and offline settings, incorporates tiered identity verification, and supports low-cost solutions. In essence, e-CNY demonstrates that strategic decisions regarding settlement, interoperability, and user control can expand financial inclusion while maintaining robust regulatory safeguards.

  • Central Bank Digital Currency (CBDC)
  • digital currency electronic payment (DCEP)
  • e-CNY pilots
  • financial inclusion
  • self-custody
  • interoperability
Central bank digital currencies (CBDCs) have moved from largely theoretical debate to concrete policy choices with material welfare implications. Statistics from the Atlantic Council indicate that more than 100 countries are exploring CBDCs, each within its own regulatory and legislative context. Yet most jurisdictions continue to iterate on design and implementation. The European Central Bank (ECB), for example, entered a formal preparation phase for a digital euro in 2023 and has since issued three progress reports (e.g., [1][2][3]). Across these initiatives, central banks increasingly frame CBDCs as instruments to promote financial inclusion, where programs remain in development and limited deployment has begun (e.g., [4][5][6]).
Law and regulation are foundational to CBDC design and implementation, as technical architectures must ultimately conform to statutory and regulatory constraints. Some jurisdictions have advanced pilots under existing frameworks. In China, the e-CNY pilot has proceeded largely without major legislative changes because the existing mobile-payments framework provides an accommodating scaffold. If the pilot moves to full issuance, however, formal confirmation of the e-CNY’s legal status would likely require statutory amendments, often discussed in connection with Article 5 of the Law of the People’s Bank of China. Other jurisdictions adopt a “law-first” approach in which legislation precedes currency rollout. For the digital euro, key design parameters are expected to be determined primarily by forthcoming EU legislation [7]. By contrast, the United States has not committed to a retail CBDC: in July 2025 Congress enacted the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, the first federal framework for payment stablecoins, and the House passed the Anti-CBDC Surveillance State Act, collectively signaling a shift toward regulating private, dollar-denominated tokens rather than building a direct-to-consumer CBDC (e.g., [8][9][10]). Irrespective of the specific digital currency frameworks nations implement, the digital currency era is upon us and promises to improve aggregate social efficiency [11].
China’s financial-inclusion strategy emphasizes equality of opportunity and commercial sustainability, with explicit attention to rural–urban gaps and underserved groups. The State Council’s Plan for Advancing the Development of Financial Inclusion (2016 to 2020) codified these priorities and positioned payment modernization as a central lever (e.g., [12][13]). The result has been widespread adoption of digital payments. By June 2024, China had 969 million online-payment users, or 88.1 percent of internet users, which creates a large user base for inclusive retail payments [14].
For end users, perceptions of control and ease of use often matter more than architectural nuance. The e-CNY incorporates hardware “value wallets” such as IC or NFC cards, SIM-based devices, and wearables, together with dual-offline functions for small transactions. These features lower learning and adoption costs for seniors and for people without smartphones (e.g., [15][16]). In a global context where 2.6 billion people remain offline [17] and 750 million lack electricity [18], offline and hardware options are prerequisites for inclusion. Recent proposals advocate for complete settlement without internet connectivity, achievable through randomness-verifiable hardware wallets that may substantially advance financial inclusion [19].
China also benefits from extensive e-payment penetration, with about one billion online-payment users by 2024, within a digital economy valued at USD 7.5 trillion [20]. The People’s Bank of China (PBOC) strengthens trust by keeping transaction fees at or below prevailing mobile-payment rates, often at zero for retail users [15]. It also relies on Internet Courts and online dispute-resolution (ODR) platforms to provide accessible remedies for small-value disputes. China established the world’s first Internet Court, which adjudicates cases arising from online commerce and copyright. Parties can file claims, submit evidence, and attend hearings remotely through secure digital portals [21].
Taken together, these institutional and infrastructural features translate the settlement-upon-payment advantage of the e-CNY into tangible inclusion gains. They reduce onboarding frictions, lower user fees, and preserve access under weak or intermittent connectivity.
Against this backdrop, China’s e-CNY offers a distinctive case. The large-scale pilot integrates the CBDC with the country’s dominant mobile payment platforms, WeChat Pay and Alipay (e.g., [22][23]) and has reportedly reached cumulative transactions exceeding USD 1 trillion [24]. The design incorporates advanced technical features while aligning with financial-inclusion objectives. For example, users can open entry-level wallets with minimal credentials (a local mobile number), subject to tiered limits on balances and transaction amounts; at the lowest tier, the permitted balance is roughly USD 700, with enhanced privacy relative to higher-KYC (Know Your Customer) tiers.
China’s e-CNY, operating at unprecedented scale, offers instructive lessons for other jurisdictions. This entry analyzes the e-CNY through a financial-inclusion lens, highlighting concrete design choices that lower barriers to access, reduce transaction costs, and enable offline functionality. Crucially, these technical features are accompanied by regulatory adjustments that align legal frameworks with new payment technologies. Such practices are of first-order importance in contexts that combine deep mobile-payment penetration with persistent access constraints: in 2023, an estimated 2.6 billion people remained offline and roughly 750 million lacked electricity, even as China reported 969 million online-payment users by June 2024 (e.g., [14][17][18]).
To standardize terminology, this entry adopts three working definitions. Settlement upon payment (SUP) denotes an instant transfer in which funds move directly from the payer’s digital wallet to the payee’s wallet and the CBDC ledger simultaneously authorizes and records the transaction. Domestic interoperability refers to the ability to transact seamlessly across wallets, QR-code schemes, and bank-account rails already used in everyday commerce; in China, this includes QR standardization, NUCC-based online clearing, and the integration of e-CNY within mobile applications (e.g., [6][25][26]). Self-custody in the e-CNY context means device-resident, operator-governed credentials (secure-element/HSM-backed on cards, phones, or wearables), which differs from user-held “cold wallets” and seed phrases common in cryptocurrency systems [6].
This entry proposes a unified evaluative framework that links three design dimensions: the locus of settlement, domestic interoperability, and device resident self-custody, to three inclusion outcomes: access, affordability, and reliability. It then offers an institutional reading of China’s two-tier architecture, highlighting flexibility in key areas, including tiered KYC, a hybrid model that avoids the token-based versus account-based dichotomy, and deep integration with central payment channels that enables broad acceptance across domestic mobile applications. This entry examines online and offline finality under Chinese private law, assessing the alignment between technical design and legal doctrine. The analysis examines three offline transfer patterns: (i) device crediting (receive-side hold), (ii) freeze until synchronization, and (iii) free spend until synchronization. It shows that, under realistic risk constraints and within the current legal framework, only the first is consistent with SUP. Building on this result, the analysis outlines a feasible path for broader use within the CBDC financial inclusion agenda, including tiered management, low-value accessibility, and secure offline transactions. The remainder of the entry is organized as follows: Section 2 sets the policy frame and details e-CNY design choices and domestic interoperability; Section 3 examines self-custody, including device-resident credentials, hardware and offline access, insolvency protection, and redress; Section 4 operationalizes SUP in both online and offline settings, specifies finality and liability across offline patterns, and addresses double-spending controls.

This entry is adapted from the peer-reviewed paper 10.3390/encyclopedia5040179

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