  The People's Bank of China (PBOC) has launched an ambitious project to
develop a digital currency for use in domestic, retail transactions, and is, by
far, the most advanced globally in this regard. In addition to involving a
diverse set of stakeholders, the PBOC established a set of fundamental
principles, including privacy, inclusiveness, and conservatism, and has
articulated its progress in a public document translated into English. We
maintain that although both its first principles and its conclusions drawn from
the research conducted by the PBOC from 2014 to date are broadly reasonable and
appropriate, the PBOC has also missed some important considerations and
entertained some questionable assumptions, which many central banks around the
world have also done. In this analysis, we consider the strengths and
weaknesses of the digital currency proposition articulated by the PBOC as it
exists today, and we propose one fundamental and specific change for the PBOC
and other central banks around the world: The architecture must accommodate
privacy-preserving, non-custodial wallets. With this change and a related set
of minor adjustments, China has an opportunity to lead the world in the
implementation of a central bank digital currency (CBDC) solution that protects
the authority of the central bank to implement monetary policy, preserves the
role of public-sector and private-sector banking institutions, promotes the
efficiency of retail transactions and businesses, satisfies regulatory
objectives, and safeguards the human rights of retail consumers, including
their privacy and their right to participate in the economy. We hope that the
PBOC, and other central banks around the world, will have the resolve and
strength of purpose to implement our proposed change and carry on with
implementing a CBDC architecture that serves the interests of its users.
