In 2014, the People's Bank of China initiated a forward-looking study of the central bank's digital currency. In 2016, the People's Bank of China Digital Currency Research Institute was established, becoming the world's first official institution engaged in the research and development of legal central bank digital currencies. The picture shows the exterior scene of the People's Bank of China. (Profile picture)
"The central bank's digital currency is coming!" Recently, a photo of the central bank's digital currency in the Agricultural Bank of China's account was circulated on the Internet. Subsequently, the progress of the central bank's digital currency pilot projects in many places and departments were successively disclosed, which aroused widespread concern.
What is central bank digital currency? How to use the central bank's digital currency? What impact will it have on economic and social development and people's daily life?
At the China International Finance (Banking) Technology and Equipment Exhibition, the audience experienced the convenience brought to life by financial services. Xinhua News Agency
The central bank digital currency is the digitization of the RMB
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my country is one of the first countries to study central bank digital currencies. As early as 2014, the People's Bank of China initiated a forward-looking study of the central bank's digital currency. In 2016, the People's Bank of China Digital Currency Research Institute was established, becoming the world's first official institution engaged in the research and development of legal central bank digital currencies. At the end of 2017, the State Council approved the People's Bank of China to take the lead in commercial institutions to develop the digital currency system (English name: digital currency/electronic payment, DC/EP).
"The central bank digital currency is a digital form of the renminbi, and it is not a new currency in itself. " Mu Changchun, director of the People’s Bank of China’s Digital Currency Research Institute, told reporters that the digital renminbi is issued by the People’s Bank of China and is operated by designated operating institutions. Public exchange, based on the generalized account system, supports the loose coupling function of bank accounts, is equivalent to banknotes and coins, and is a controllable and anonymous payment tool with value characteristics and legal compensation.
Specifically, first, the digital renminbi is issued by the People's Bank of China, which is a legal tender with national credit endorsement and legal solvency . Compared with virtual currencies such as Bitcoin, digital renminbi is a legal currency, equivalent to legal currency, and its effectiveness and security are the highest, while Bitcoin is a virtual asset without any value basis and does not enjoy any sovereign credit guarantee , Cannot guarantee value stability. This is the most fundamental difference between central bank digital currency and crypto assets such as Bitcoin.
In terms of issuance and exchange, the digital RMB adopts a two-tier operating system. That is, the People's Bank of China does not directly issue and exchange central bank digital currencies to the public, but first convert the digital renminbi to designated operating institutions, such as commercial banks or other commercial institutions, and then exchange them to the public. This two-tier operating system is basically the same as banknote issuance, so it will not have a major impact on the existing financial system, nor will it have a major impact on the real economy or financial stability.
Regarding the broad account system as the basis, Mu Changchun explained that the bank account system is a very strict system. Generally, it is necessary to submit a lot of documents and personal information to open a bank account. Under the central bank digital currency system, any unique identifier that can form a personal identity Anything can become an account . "As long as you can prove your identity, you can use it as an account. For example, your license plate number can become a sub-wallet of digital renminbi, and you can pay when you pass the highway or park. This is the general account system. concept."
The so-called support for loose coupling of bank accounts means that a digital RMB wallet can be opened without a bank account. For some people in rural areas or remote mountainous areas, even if they do not have a bank account, they can still enjoy the corresponding financial services through digital wallets, which helps to achieve inclusive finance. In addition, for overseas tourists who do not have domestic bank accounts, it is also possible to open a digital RMB wallet to make small payments more conveniently.
How is digital renminbi equivalent to banknotes and coins? In fact, when the People's Bank of China converts the central bank's digital currency to a designated operating agency for issuance, the institution needs to pay 100% of the reserve to the People's Bank of China. This is the 1:1 exchange process . This can ensure that the central bank's digital currency will not be overissued and there is no room for market speculation.
"In the final analysis , the central bank's digital currency is a payment tool that embodies the basic functions of currency ." Mu Changchun said that the central bank's digital currency is actually the digitization of the renminbi, a digital version of the renminbi.
Will not impact WeChat Alipay
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According to the "2018 China Inclusive Financial Indicators Analysis Report" issued by the Central Bank in October 2019, as of the end of 2018, China had 7.22 bank accounts per capita, and the proportion of adults using electronic payments in the country exceeded 80%. So, when my country's electronic payment system is so developed, why do we need to study and launch central bank digital currencies?
The launch of central bank digital currency has far-reaching significance. Mu Changchun said that the emergence of Bitcoin and other encrypted assets will have a certain impact on a country's currency sovereignty. The primary purpose of launching central bank digital currency is to protect currency sovereignty and legal currency status. At the same time, the emergence of digital renminbi will improve the efficiency of payment systems and enhance the facilitation level of renminbi payments. "Everyone knows that the retail payment system will be under great pressure during the peak shopping period of "Double 11" and "618", so the digital renminbi must also be able to meet this high-concurrency and retail demand. Contribute to the efficiency of the payment system."
Xiao Lin, an assistant professor in the Department of Applied Economics, Guanghua School of Management, Peking University, analyzed that the central bank's digital currency can solve two problems in the practical application of cash and electronic payments. One is that banknotes and coins are easily anonymized and counterfeited, and they are used for money laundering, The risks of terrorist financing; the second is that electronic payments based on the existing bank account tight coupling model cannot meet the public’s demand for anonymous payments.
According to Huang Guoping, director of the Investment and Financing Research Center of the Chinese Academy of Social Sciences, the existing paper money and coin printing and distribution costs are high and inconvenient to carry, so there is a need for digitalization. Once the central bank's digital currency is launched, it will greatly save the costs of coinage.
Under the epidemic, the central bank's digital currency can also reduce the chance of virus spread in currency transactions . Yang Dong, Executive Director of the Laboratory of Regulatory Technology and Fintech at Renmin University of China, said that institutions and individuals will be more inclined to use indirect trading media including central bank digital currency in a short period of time. Central bank digital currency will use this as a Opportunity to accelerate its issuance and application.
Many people are concerned about whether the central bank's digital currency will affect Alipay and WeChat payment. In response, Mu Changchun said that the central bank's digital currency will not have an excessive impact on the current mobile payment, but will give the people a richer choice of payment tools to meet more payment needs . "At present, Alipay and WeChat use commercial bank deposit currencies for payment. After the central bank digital currency was launched, it actually converts the money in the wallet from the commercial bank deposit currency into central bank currency. The wallet itself has not changed, just the wallet. The form or type of money has changed, and WeChat or Alipay is still used as a wallet to provide payment services for the people."
In fact, for the masses who are accustomed to using mobile payment, Alipay, WeChat Pay, etc. have become a kind of public product or service. Once there is an extreme situation such as service interruption, it will have a great impact on social and economic activities and people's lives. This requires the People's Bank of China, as a public sector, to provide tools and products with similar functions as a backup of corresponding public products.
The use of central bank digital currency is a market-oriented selection process
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When using mobile payment, people sometimes encounter some embarrassing scenarios: for example, paying in an underground parking lot without internet, or shopping on airplanes or cruise ships with poor signal. Unless they have cash, it is very difficult to even buy a bottle of water. Using central bank digital currency can avoid such problems . In terms of application scenarios, the central bank's digital currency can realize "dual offline payment" like banknotes, that is, payments can be made even when both parties are offline. In the future, as long as the mobile phone is equipped with a digital renminbi wallet, no network or signal is required. As long as the mobile phone has electricity, the two mobile phones can be touched to realize transfer or payment.
At the same time, the central bank's digital currency can also meet people's normal anonymous payment needs. Current payment tools such as Internet payment and bank card payment are tied to the traditional bank account system and cannot meet the demand for anonymity. The digital renminbi does not rely on bank accounts and has the function of controllable anonymity. For some reasonable and legal small payment behaviors, it can realize anonymous payment, thereby protecting personal privacy and information security.
"You can pay with the touch of a mobile phone. Is the central bank's digital currency wallet safe?" "Can the elderly in remote rural areas learn to use it?" From the comments of some netizens, it can be seen that netizens are safe and universal in central bank digital currency payments. The degree of great attention.
"You don't have to worry about this kind of security issue." Mu Changchun said that in terms of product design, there needs to be an active confirmation before digital RMB transactions. Without confirmation, the transaction cannot be completed, which can ensure the safety of funds. At the same time, if the central bank's digital currency is actually misappropriated , the digital renminbi can provide a loss report function for real-name wallets.
Regarding the universality of the central bank's digital currency, according to reports, the design of the digital renminbi has fully considered the needs of people who are unwilling to use or unable to use smart terminals. In the future, it can be realized whether it is with IC cards, functional machines or other hardware Payment in central bank digital currency. "The central bank's digital currency is a payment tool that serves the people of the whole country. It will not only satisfy the people who use smart terminals, but the needs of all people must be taken care of."
Will the central bank digital currency completely replace cash? Mu Changchun said that from a global perspective, cash has shown a downward trend in both absolute and relative amounts. Many countries, including China, have entered a cash-light society. The emergence and circulation of central bank digital currency can replace the original banknotes to what extent and how quickly it depends on whether the digital currency design of central banks can meet the needs of the public and whether it can facilitate the payment of ordinary people . "This is not a compulsory process, but a process of market-oriented selection. We design the digital renminbi based on the needs of ordinary people, and also realize the issuance and use of digital renminbi from a market-oriented perspective."
Help fight corruption
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In the reports of the disciplinary inspection and supervision organs, we often see such cases: a leading cadre accepts huge bribes from others, a grassroots cadre falsely reports falsely taking, withholding and embezzling relief funds for the people in difficulty, and a certain duty crime escapee laundering illicit funds through underground banks …So, what role can the central bank's digital currency play in fighting corruption and official crimes?
In Mu Changchun's view, as a payment tool, in the design, the central bank's digital currency divides the digital renminbi wallet into several levels according to the strength of the customer information. If you are making large payments or transferring funds, you must apply for a real-name wallet. For large amounts of corruption, bribery and money laundering, because the information is real-named, it can provide corresponding assistance for case investigation and fund tracking.
In response to the frequent infringement of the interests of the grassroots people, digital currencies are also promising . In the process of distributing many people’s livelihood funds, it is possible to achieve fixed points to people through digital currency smart contracts, and the relevant funds can be directly distributed to the digital wallets of the masses, without passing through layers of intermediate links, so as to prevent false claims and false claims beforehand , Withhold the possibility of misappropriation.
In practice, some corrupt elements will evade supervision by breaking up large transactions into parts. When applied to the field of central bank digital currency, there may be corresponding illegal and criminal activities through small anonymous wallets. So can anonymous wallets be unregulated? The answer is not so.
"We need to strike a balance between protecting personal privacy and preventing crime." Mu Changchun said that digital renminbi has adopted many technical measures to ensure that users' personal privacy and information security are not infringed, but for corruption, money laundering and other illegal crimes. Behavior can not be tolerated. When the competent authority issues corresponding legal documents in strict accordance with the procedures, it is necessary to cooperate, carry out corresponding data verification and cross-checking, and provide information support for combating illegal crimes.
Source: Central Commission for Discipline Inspection of the National Oversight Committee website: segment Sang Woo
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