The importance of central bank digital currency is self-evident. Since its proposal, it has received a lot of continuous attention. Not only the digital currencies of central banks of various countries, many commercial institutions have also joined the launch of their own stable coins, such as Facebook, JP Morgan Chase, Citibank and other large institutions.
At the same time, China's central bank digital currency has achieved a first-mover advantage. Since the establishment of the Central Bank Digital Currency Research Institute in 2016, China's central bank digital currency research and development has lasted 5 years. Officials said that the digital currency is "ready to come out" and explained its design mechanism. The central bank's digital currency gradually revealed the mystery.
According to Morecoin's understanding, Fan Yifei, deputy governor of the central bank, disclosed in public that "the current digital renminbi has achieved phased results and is undergoing internal closed testing." As soon as the news came out, the central bank digital currency (DC/EP) once again became the focus of discussion.
This year, the central bank digital currency DC/EP has been piloted in Shenzhen, Suzhou, Xiongan New District, Chengdu and other four places. CCB briefly opened the registration channel of its central bank digital currency wallet to the public at the end of August. Various signs indicate that the central bank digital currency has Gradually approaching, about to "fly into the homes of ordinary people."
As technology matures, it is not difficult for the central bank to issue digital currencies. But the central bank's digital currency brings not only the complexity of currency operations, but also a greater impact on the financial system. Blindly issuing central bank digital currencies will not only fail to achieve the desired results, but will also end in failure. The key to the question is: what kind of central bank digital currency do we need?
The real central bank digital currency is not just as simple as issuance. In the circulation and transaction process after issuance, how to better serve the social and economic development, serve the central bank's policy goals, and serve the financial regulatory requirements is the focus.
Avoid financial disintermediation and adhere to central bank management
From the current public information, the central bank's digital currency has value characteristics and legal compensation, and supports controllable anonymity. Digital RMB is mainly positioned in cash in circulation, and this positioning contains rich theoretical connotations and policy choices.
First of all, in recent years, crypto assets such as Bitcoin and global stablecoins have tried to perform currency functions, and a new round of private currency, foreign currency and legal tender has begun. In response to this situation, it is necessary for the country to use new technologies to digitize M0 and provide a universal base currency for the development of the digital economy.
Secondly, various payment systems such as commercial banking systems and non-bank payment institutions have been continuously improved and upgraded to better meet the needs of economic development. Replacing M1 and M2 with digital renminbi will neither help improve payment efficiency, but will also cause a huge waste of existing systems and resources.
In the operation of the central bank's digital currency, DC/EP adopts a two-tier operating system of "central bank-commercial bank/other operating institutions". Commercial banks and other payment institutions are becoming more mature in IT infrastructure applications and service systems, which is conducive to giving full play to the talent and technical advantages of commercial institutions.
In the user terminal, DC/EP mainly exhibits three characteristics:
The first is the balance between privacy protection and the fight against crimes. For the privacy needs of the public's normal economic life, DC/EP must be protected, so controllable anonymity must be realized.
The second is the dual offline payment function. Third-party payment tools such as online banking and Alipay need to be connected to the Internet during transactions, otherwise the transaction cannot be performed; and the dual offline payment function of DC/EP, even if the two parties are offline, as long as the two mobile phones are touched, the wallet key will be exchanged. Can complete the transfer transaction.
The third is mainly for small retail scenes, with amount and time restrictions. It is helpful to solve the "double-spending problem", and is also out of the consideration of protecting commercial banks and preventing "financial disintermediation".
From the perspective of M0's management model, currency issuance is the basic responsibility of the central bank, and digital RMB should adhere to the central bank's centralized management. From a global perspective, centralized management of M0 issuance and circulation is a common practice of global central banks. In order to ensure the ability to control currency issuance and monetary policy, central banks and monetary authorities in major economies around the world have implemented centralized management of the issuance and circulation of cash.
Fan Yifei, deputy governor of the central bank, said: To maintain the central bank's central management position in digital renminbi issuance, the following must be done:
The first is to coordinate the management of the digital renminbi quota and formulate unified business standards, technical specifications, safety standards and application standards.
The second is to coordinate the management of digital renminbi information, record and monitor the exchange and circulation of digital renminbi by mastering all transaction information, and improve the central bank issuance system in the digital age.
The third is to coordinate the management of digital renminbi wallets. On the premise of adhering to the unified cognitive system and anti-counterfeiting functions of digital renminbi, based on the principle of two-tier operation, the central bank and designated operating agencies jointly develop the wallet ecological platform by means of co-construction and sharing. At the same time realize their own visual recognition and characteristic functions.
The fourth is to coordinate the construction of digital renminbi issuance infrastructure, realize interoperability across operating institutions, and ensure the stable and orderly circulation of digital renminbi.
Improve the efficiency of cross-border payment and promote the internationalization of RMB
Previously, an important feature of digital cryptocurrencies, including Libra, was their strong convenience in international payment and settlement. Therefore, some people believe that the central bank's digital currency can promote the internationalization of the renminbi, but there are also opinions that the degree of renminbi internationalization is mainly Depending on its own competitiveness, digitalization is only a form, not a decisive factor.
At present, the direct relationship between the digital currency to be issued by the central bank and the internationalization of the RMB is not obvious. Morecoin believes that whether a currency can be accepted internationally has nothing to do with whether the currency is digitized, but depends on whether the currency's exchange rate is flexible, whether the market is open, and whether foreign investors are confident and willing to use the currency .
Therefore, the internationalization of the renminbi must go forward by itself, and then digital renminbi can help the process of renminbi internationalization more convenient, such as cross-border payment, cross-border trade, cross-border investment settlement, these costs can be greatly reduced.
In terms of cross-border payments, DC/EP can not only increase the speed of cross-border transfers, but also reduce the cost of remittances; in addition, the current central bank digital currency adopts a loosely coupled account design, which means that users do not need to bind the bank when using the central bank digital currency The account can be transferred and paid, which is very attractive to the overseas people who are in poor and remote areas and lack traditional financial infrastructure (banks).
In the future, with the gradual liberalization of DC/EP restrictions on payment time and amount, it will promote the internationalization of the RMB in trade and financial transaction settlement and pricing.
Digital currency may be the ultimate place for future financial competition
At present, most countries have realized the importance of central bank digital currency, but they are more cautious about issuing central bank digital currency. Judging from current practice, the Central Bank of China has a clear and comprehensive understanding of the necessity and urgency of legal digital currency, and its practice is undoubtedly walking in the forefront of the world.
In the future, financial competition may be in the field of digital finance, and the most important thing is digital currency. Why are all countries suddenly interested in central bank digital currencies? The digital currency issued by the central bank is likely to be the dominant one and the winner takes all. Of course, it does not rule out that there will be many central bank digital currencies in the market at the same time.
But if you lag behind others, if you can't compete with others, maybe the opportunity is gone. In the end, maybe the winner takes all. The reason is that in the future, once a platform with a long tail effect is established, the marginal cost of this digital technology is very low.
In the process of currency evolution, multiple digital currencies may also compete together. Is it to form a new international currency that will dominate the international financial system in the future, or among these currencies, the sovereign currency is tilted towards the euro, the dollar, the yen, including the renminbi and other currencies, or a new currency will be triggered in the middle , It is unpredictable. But from a technical point of view, it is unlikely that so many currencies will coexist for a long time.
to sum up
Digital currency will replace cash. This is a historical necessity. The convenience brought by digital currency will also greatly affect the liquidity and development of the financial market. In particular, new technologies represented by smart contracts are generating new financial service model innovations at an unprecedented speed.
For central bank digital currencies, how to adapt to new changes and challenges such as supervision and network security will inevitably become the top priority of central banks. The central bank's digital currency contains competitions in various aspects such as technology, monetary policy, and supervision, and it is a must for major countries in the future.
As a one-stop digital asset financial service platform, Morecoin (www.morecoin.com) will follow the latest developments and news of the central bank's digital currency in real time, provide users with the most fresh and high-quality reports, and help users discover investment opportunities and in-depth analysis Market data indicators make users a smart investor.
What will happen to the central bank's digital currency in the later period? What are the latest developments? let us wait and see.