Research on Legal Supervision Issues of Cross Border Payment of

e-CNY

Zhuoyao Chen

Law School, Jiangxi University of Finance and Economics, Nanchang, Jiangxi, China

Keywords: e-CNY, Cross-Border Payment, Legal Supervision, Risk Prevention and Control, International Collaboration.

Abstract: As China’s e-CNY advances toward internationalization post-domestic pilots like the 2022 Winter Olympics,

its cross-border payment system faces legal-regulatory challenges, such as ambiguous jurisdictional

frameworks, sovereignty disputes, and fragmented global oversight. This study identifies risks spanning

money laundering, privacy breaches, and regulatory arbitrage, driven by gaps in domestic legislation and

insufficient multilateral coordination. To address these, a dual-track regulatory model is proposed, including

strengthening domestic laws via tech-driven tools (e.g., AI monitoring, blockchain traceability) to balance

privacy and public security and leveraging bilateral/multilateral platforms (e.g., Belt and Road partnerships)

to harmonize standards on currency sovereignty and risk-sharing. Case analyses underscore the need for

adaptive governance that integrates legal rigor with technological innovation, while fostering global

consensus on digital currency rules. These insights offer a roadmap for e-CNY’s secure global integration,

balancing regulatory efficacy with cross-border interoperability.

1 INTRODUCTION

With the development of the digital economy and the

advancement of technology, e-CNY, which conforms

to the trend of the times, has emerged. China has

extensively carried out pilot projects domestically,

and the 2022 Beijing Winter Olympics conducted

innovative application pilot projects for e-CNY.

China is also promoting the international circulation

of e-CNY. The Financial Gateway Information

Service Co., Ltd., established in January 2021, has

stated that SWFT intends to collaborate with e-CNY

to explore cross-border payment and liquidity

solutions for future digital goods. The Hong Kong

Monetary Authority is conducting technical tests on

e-CNY cross-border payments with the Digital

Currency Research Institute of the People's Bank of

China. The Guangdong Macao Cross Border

Financial Cooperation (Zhuhai) Demonstration Zone

also intends to pilot the use of e-CNY in cross-border

scenarios (Bu & Ma, 2022). However, the hidden

legal conflicts and lack of rules in cross-border

payments are becoming key constraints on their

global application. Currently, e-CNY cross-border

payments face multiple legal challenges. Firstly, there

is a lack of laws related to e-CNY; Secondly, there is

controversy over currency sovereignty among

countries; Thirdly, facing the issue of e-CNY

regulation. This article focuses on research of e-CNY

regulation issues. At present, the theoretical

community believes that China should provide good

legal and regulatory rules for the cross-border

circulation of e-CNY. At the same time, it is difficult

for each country to independently regulate, and the

way out lies in establishing an international

regulatory legal system (Bu & Ma, 2022; Rao, 2022).

The White Paper on the Development Progress of

China's e-CNY in July 2021 pointed out that the

regulation of e-CNY should follow three principles:

maintaining its status as a legal tender, strictly

preventing financial risks, and encouraging

technological innovation. The main measures include

developing specialized business standards, strictly

managing operating institutions, preventing illegal

activities such as money laundering, preventing

personal information leakage, and optimizing the

usage environment (Li &Wu, 2023). Therefore, this

article aims to evaluate the regulatory issues in cross-

border payments of e-CNY through literature review

and case analysis, assess the risks of e-CNY

regulation, and elaborate on the basic principles of

legal regulation of e-CNY, providing suggestions for

430

Chen, Z.

Research on Legal Supervision Issues of Cross Border Payment of e-CNY.

DOI: 10.5220/0014382800004859

Paper published under CC license (CC BY-NC-ND 4.0)

In Proceedings of the 1st International Conference on Politics, Law, and Social Science (ICPLSS 2025), pages 430-435

ISBN: 978-989-758-785-6

the establishment of regulatory rules for cross-border

payments of e-CNY.

2 LITERATURE REVIEW

Firstly, regarding the issue of legal deficiency.

Scholars have proposed that legal compensation has

strict regional characteristics and is currently only

applicable to domestic circulation. It does not have

enforcement power in other countries and can only

rely on the trust of the international community and

the independent choice of market payment entities

(Li & Wu, 2023). Some scholars also believe that

virtual currency is different from traditional currency

in that it is not legal tender, lacks legal protection,

and its circulation is restricted everywhere (Eyal,

2017). In addition, some scholars believe that unclear

or even missing legal provisions may weaken public

confidence in digital currencies (Kapsis, 2021).

Based on this, this research report believes that it

should not be limited to the establishment of a single

domestic legal regulation and the definition of legal

concepts but should also focus on the joint analysis

of domestic law, international law, and technological

means.

Secondly, regarding the issue of monetary

sovereignty. Scholars have proposed that the

"positive externalities" and "winner takes all"

characteristics of Central Bank Digital Currencies

(CBDCs) will lead to strong competition among

countries for CBDCs, and e-CNY will face resistance

from other countries; Scholars have further proposed

that there may be currency substitution of digital

currencies by other countries and the substitution of

digital currencies by dominant digital currencies of

other countries (Bu & Ma, 2022; Li & Wu, 2023).

Based on this, this research report believes that the

above views tend to be more confrontational and can

seek solutions through international cooperation.

In addition, regarding the regulation of e-CNY.

Scholars have suggested that, like traditional

currencies, Bitcoin is suitable for both legitimate

purposes and can be used by criminals for illegal

transactions. Digital currencies almost always carry

this risk, and e-CNY is no exception (Silva Ramalho

& Igreja Matos, 2021). The e-CNY pilot adopts a

"controllable anonymity" mechanism, which divides

access to users' personal information to different

levels based on the value of their transactions. Small

transactions are anonymous, while large transactions

can be traced. This will enable a large number of

transaction subjects to escape the control of China's

financial regulatory system, thereby facilitating

international currency crimes. Some scholars have

also proposed that users may be affected by uneven

legal regulatory systems, and personal data may be

transferred to countries with lower protection

standards, which may also be accessed by foreign

governments without authorization, putting users at

risk of international data breaches (Cheng, 2022;

Artemov, et.al, 2020; Kieran Murphy et al., 2024).

Therefore, the protection of personal data requires a

dynamic balance between self and others, private

space and public domain (Acquisti, et.al, 2016). In

addition, some scholars have further pointed out that

there are problems in the allocation of international

regulatory responsibilities for cross-border payments

of digital currencies, making it difficult to form

coordinated and consistent international regulatory

rules and standards. It is pointed out that the basic

principles of international regulatory cooperation

should be ensured, and new models of technology

regulation should be added (Li & Wu, 2023). We

need to establish specialized regulatory agencies,

clarify the division of regulatory responsibilities,

develop a regulatory framework that covers entry

thresholds, business scope, and risk prevention and

control, and pay attention to the precise definition of

responsibilities of regulatory departments at all

levels. In response to the new business models in the

development and application of e-CNY, it is

necessary to maintain moderate regulatory

flexibility, balance innovation incentives and risk

prevention and control (Wang & Zhong, 2020).

Based on this, this paper believes that the above

views do not establish specific principles in

regulation, do not specify the way of science and

technology regulation, and do not specify the

specific dispute resolution method when the

transaction involves the interests of many countries.

For example, how the regulatory power of each

country should be allocated and also ignore the

situation that some countries in the international

community may not cooperate with each other.

Therefore, the system and rules can be gradually

improved through the "Belt and Road".

Research on Legal Supervision Issues of Cross Border Payment of e-CNY

431

3 PRINCIPLES AND RISKS OF

CROSS BORDER PAYMENT

SUPERVISION FOR e-CNY

3.1 Basic Principles of Cross Border

Payment Supervision for e-CNY

3.1.1 Principle of Balancing Personal

Privacy and Public Interest

Privacy is a human right, not only an important

barrier for individuals to achieve personal dignity, but

also an important factor in building a social trust

system. In today's rapidly developing digital

economy, privacy protection is facing unprecedented

challenges and opportunities. Related scholars have

proposed that the protection of personal data requires

a dynamic balance between self and others, private

space and public domain, which is particularly

important in the regulatory practice of e-CNY. In the

current digital economy, there is a structural

contradiction between the efficiency of data

circulation and privacy protection (Acquisti et al.,

2016). Excessive emphasis on privacy protection may

hinder the efficiency of financial transactions and

harm socio-economic benefits, but if social benefits

are excessively pursued, such as in some countries

where open payment data sharing leads to transaction

information being abused by commercial institutions,

it can cause privacy risks. This dilemma is

particularly prominent in the application of e-CNY,

as it combines legal compensation and digital

features. It requires both enhancing the influence of

monetary policy through data circulation and

preventing CBDC from becoming a loophole for

information leakage.

3.1.2 Balancing Regulatory Legal Systems

with Scientific and Technological

Principles

In the context of the digital age, the synergistic

development of legal systems and scientific

technology, which is a mutually empowering and

beneficial interaction, has particular practical value in

the cross-border supervision of e-CNY.

The legal system plays a supportive role in

technological innovation. In response to scientific and

technological advancements such as blockchain and

artificial intelligence, countries have successively

issued normative documents, which not only clarify

the legal boundaries of scientific and technological

applications but also reserve legal space for key

technological innovations. This legislative wisdom of

system first, flexible regulation not only prevents the

risk of technological loss of control but also ensures

the vitality of technological innovation.

Technology can empower legal regulation. A

cross-border fund monitoring system based on big

data, which can track the transaction path of e-CNY

in real time; By utilizing the immutable nature of

blockchain, anti-money laundering capabilities can

be significantly improved; The application of smart

contract technology enables the automated execution

of pre-set regulatory rules among central banks in

multiple countries.

It can be seen that the legal system can pave the

way for science and technology, provide legal

protection and preferential policies for emerging

technologies. At the same time, using technology to

assist legal supervision can improve regulatory

efficiency and expand regulatory scope. Balancing

both can better achieve cross-border regulation of e-

CNY.

3.2 Risks of Cross-Border Payment

Supervision for e-CNY

3.2.1 Breeding of International Money

Laundering Crimes

As a digital currency, e-CNY has anonymity, and

there are still many unclear regulations in its legal

system. There is a risk that criminals may use the

legal loopholes between digital currency and

traditional currency conversion to commit cross-

border money laundering crimes, thereby

endangering the security of the country's currency

reserves.

In 2013, the Liberty Reserve case was the largest

money laundering operation in history at that time

(FATF, 2014). In this case, an international trading

platform for free reserve dollars and free reserve

euros used Liberty Reserve for online payments, with

Liberty Reserve serving as an intermediary and

bridge in the flow of dollars and euros. Since 2006,

the platform has conducted millions of financial

transactions, the vast majority of which are related to

financial crimes. Due to the low entry threshold of

Liberty Reserve, which allows anonymous use and

relaxed identity checks on users, a large number of

users register with false or even fabricated

information, which will greatly weaken the strength

of financial regulation and provide convenience for

criminals to carry out money laundering and other

criminal activities. Also, due to Liberty Reserve's

global support, there is no need for credit card

ICPLSS 2025 - International Conference on Politics, Law, and Social Science

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activation, which will lower the threshold for cross-

border payments and hide significant international

money laundering risks. Although Liberty Reserve

does not trade e-CNY, the international crime

outbreak in 2013 serves as a warning to countries that

the use of digital currencies carries the risk of

breeding international money laundering crimes

(Silva Ramalho &Igreja Matos, 2021).

3.2.2 Personal Privacy Leakage

The circulation of e-CNY requires registration and

authentication of information before it can be

circulated normally. There is a risk of data leakage in

this process, which may involve personal data or

identity information in transactions being obtained by

hackers, malicious software, etc. due to security

vulnerabilities, resulting in the theft of user identity

information, telecommunications fraud, etc.

In the international context of CBDC, data flows

across borders. This will result in inadequate

regulation due to the lack of unified legal systems in

various countries. Personal data may be transferred to

countries with lower protection standards, which may

also be accessed by foreign governments without

authorization, putting users at risk of international

data breaches (Kieran Murphy et al., 2024). In

addition, in addition to central banks of various

countries, some non-central bank organizations may

also have the right to participate in various CBDC

transactions, and they may not have the ability to

ensure relative safety, resulting in additional financial

risks (World Economic Forum, 2021).

In addition, the majority of respondents believe

that privacy protection is the primary condition for

using e-CNY (ECB, 2021). However, due to unclear

or even missing legal provisions, it may weaken

public confidence in digital currencies, trigger

resistance among the masses, and further hinder the

development of digital currencies (Kapsis, 2021).

Therefore, in the process of regulating e-CNY, in

order to ensure the effective circulation and payment

of e-CNY, personal privacy may be leaked, posing a

threat to personal privacy security and affecting the

popularity of e-CNY.

4 ESTABLISHMENT OF

INSTITUTIONAL RULES FOR

THE SUPERVISION OF e-CNY

4.1 Domestic Level

4.1.1 Improve Domestic Legislation

In 2020, the People's Bank of China (PBOC) and four

other ministries jointly issued the Opinions on

Financial Support for the Construction of the

Guangdong Hong Kong Macao Greater Bay Area,

which clearly proposed the establishment of a

"sandbox" for cross-border financial innovation

supervision (PBC, CSRC&SAFE, 2020). Regulatory

sandbox is a trial-and-error mechanism with

conditional regulatory exemptions, which has the

advantage of balancing the encouragement of

innovation and risk prevention (Wang &Chen, 2023;

Zhang, 2018). Therefore, China can apply innovative

e-CNY regulatory legislation in pilot zones such as

special economic zones, and timely adjust the

problems exposed in the sandbox to prevent hidden

risks.

There are many contradictions between China's

pilot of e-CNY and legislation, and the law often lags

behind relevant practices. For example, the current

pilot of e-CNY may conflict with China's Personal

Information Protection Law (PIPL). According to

PIPL, anonymized personal information cannot be

identified and cannot be recovered after

anonymization processing. However, in the pilot of e-

CNY, user information can still be traced when

investigating and punishing regulatory activities such

as money laundering (Cheng, 2022). This is

equivalent to preserving the possibility of "de

anonymization" at the technical level, which conflicts

with legal provisions and requires further clarification

and regulation by relevant laws. Therefore, the newly

added or improved clauses in PIPL can be piloted and

implemented in the regulatory "sandbox". Through

investigation and evaluation, eligible economic zones

such as free trade zones and free trade ports can be

used as a "sandbox" for control group experiments.

4.1.2 Supervision Through the Use of Big

Data and Other Technological Means

Establish a big data center, utilize distributed ledgers

to obtain timely, analyze, and monitor the transaction

status of e-CNY, discover abnormal and suspicious

transactions, and extract and preserve evidence (Bu &

Ma, 2022). Regulatory technology should also be

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applied, such as China's e-CNY pilot using a

"controllable anonymity" mechanism. Its technology

achieves intelligent separation of user identity and

transaction information in the transaction verification

process through layered encryption and permission

control. According to the value of user transactions,

accessing their personal information is classified into

different levels, with small transactions being

anonymous and large transactions being traceable.

Small scale anonymity means that in retail

transactions, only the ownership of the wallet needs

to be verified rather than the user's identity, while in

large scale transactions, information is traced

according to legal and regulatory rules. PBOC

describes this controllable anonymous connection

between a user's bank account and their electronic

RMB wallet as a 'loosely coupled account link'

(Cheng, 2022). This not only meets the privacy needs

of daily payments but also ensures effective public

supervision such as anti-money laundering.

Regulatory agencies need to improve their regulatory

level through regulatory technology, anticipate

potential risks in advance, monitor the market in real-

time 24 hours a day, maintain long-term tracking of

issues, and strengthen collaboration and cooperation

among various departments. At the same time, it is

necessary to improve the ability to analyze and

control risks, so that regulatory work can discover

problems faster and solve them more effectively.

By utilizing technological means for supervision,

it is possible to comprehensively and effectively

regulate cross-border payments of e-CNY. Under the

application of big data, achieve full coverage and

round the clock supervision, and reduce the

probability of oversight.

4.2 International Level

4.2.1 International Consensus on

Regulatory Rule Design-"The Belt and

Road" Regional Demonstration

The current situation poses challenges to the

standardized development of e-CNY cross-border

payment business. Given that it is still difficult to

reach a global and large-scale international

consensus, and based on the international situation,

some countries refuse to cooperate, China can

establish an international coordinated regulatory

mechanism starting from the "the Belt and Road". As

cross-border payment involves two-way flow of

funds, PBOC and other regulatory authorities need to

establish cooperation alliances with regulatory

authorities in various countries. By signing bilateral

treaties, multilateral treaties and other forms, the

dispute resolution mechanism for cross-border

circulation of e-CNY and the allocation of powers

and responsibilities for supervision in various

countries should be clarified, so as to form unified

international regulatory norms and international

customs. Through information sharing and joint law

enforcement, they should jointly crack down on

illegal and criminal activities such as money

laundering through cross-border payment channels

and effectively build a defense line for financial

security.

Starting from the "the Belt and Road", we should

start from a small scale to reach an international

consensus on the "the Belt and Road” and then

expand our influence to escort the internationalization

of e-CNY. Through this gradual breakthrough

strategy, e-CNY is expected to establish a regional

cross-border payment main channel, providing a

Chinese solution for reconstructing the international

monetary order.

4.2.2 Improve International Regulatory

Agencies for Digital Currencies

The scale of global digital currency transactions is

becoming increasingly large, and the international

community urgently needs to establish a unified

regulatory framework and improve the international

regulatory agencies for digital currencies.

According to the 1965 Washington Convention,

member countries of the World Bank (WB)

established the International Centre for the Settlement

of Investment Disputes (ICSID) to resolve disputes

between governments and foreign private investors

through mediation or arbitration, promote mutual

trust, and encourage international capital flows. Non-

governmental investors who have disputes over

digital currencies with the host country can apply for

ICSID mediation or arbitration (Li & Qu, 2022). In

view of this, member countries of the World Bank

(WB) can establish an international regulatory body

for digital currencies by improving the 1965

Washington Convention. International regulatory

agencies for digital currencies have the authority to

control global digital currency circulation data and

have an obligation to capture data with risks. They

can establish multiple functional departments, such as

the Digital Currency Technology Group, to maintain

the system on a daily basis, solve technical problems

in cross-border supervision, and build a global digital

currency crime case database; The Digital Currency

Crime Supervision Group focuses on anti-money

laundering and other work, providing illegal activities

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and electronic data evidence to ICSID; The risk

control center establishes a five level response

mechanism and initiates differentiated disposal plans

for different risk levels.

International regulatory agencies for digital

currencies can also suggest that countries share

successful cases in a timely manner, widely collect

experiences from various countries, ensure effective

regulation of digital currencies, and ensure accurate

implementation of dispute resolution.

5 CONCLUSION

This article analyzes the principles and risks of e-

CNY cross-border payment regulation through

literature review and case analysis methods and

further summarizes how to establish a regulatory

system for e-CNY cross-border payments.

Specifically, in the regulation of e-CNY cross-border

payments, it is necessary to adhere to the balance

between personal privacy and public interests, take

into account regulatory legal systems and scientific

and technological principles, and face risks such as

money laundering and personal privacy leakage. We

should improve domestic legislation, use big data and

other scientific and technological means to regulate,

reach international consensus on the design of

regulatory rules through the "the Belt and Road" pilot

demonstration, and improve national regulatory

agencies for digital currencies to ensure the

internationalization of e-CNY. Future research can

delve into the application boundaries of science and

technology such as artificial intelligence in cross-

border payment regulation, laying a compliant

development path for the internationalization of e-

CNY.

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