In 2014, the People's Bank of China officially launched the legal digital currency research and was the first central bank to conduct digital currency research and experimentation. Since the beginning of this year, digital currencies have received widespread attention from all walks of life. In April, the People's Bank of China digital currency launched pilot projects in Xiongan New District, Shenzhen, Chengdu, and Suzhou.
In August, the news reported that companies such as McDonald's in Xiongan New District were piloting digital currencies. Some civil servants in Suzhou used digital currencies to receive their salaries. In October, the Shenzhen Municipal People's Government and the People's Bank of China launched a pilot digital RMB red envelope. Fan Yifei, the deputy governor of the People's Bank of China, also publicly stated in September that the digital renminbi research and development has achieved initial results and is undergoing internal closed tests. Foreign digital currencies are also developing rapidly. According to relevant research, about 70% of central banks in the world are paying attention to digital currencies. Many countries such as the United Kingdom, Japan, Sweden, and Singapore are promoting the development of central bank digital currencies.
Digital currency is a currency that exists in digital form and has no physical carrier. Among them, the digital currencies issued by central banks of various countries are legal digital currencies. The digital currency issued by the People's Bank of China can also be called digital renminbi. Digital currency is different from virtual currency. Digital currency is issued by the central bank, has the endorsement of national sovereign credit, and has unlimited legal solvency; virtual currency is issued by a private entity and is used and accepted by a group of members. It lacks Credit endorsement and asset backing are highly substitutable, such as various tokens in cyberspace, as well as Bitcoin and Ethereum.
Furthermore, even if virtual currency maintains a certain exchange ratio with legal digital currency, it only fulfills the role of token rather than legal digital currency. Digital currency is also different from electronic currency and mobile payment. Digital currency is a change in currency form and does not require paper currency support. Its payment transaction and bank account are loosely coupled; electronic currency and mobile payment are payment methods or channels The change does not change the currency form, and there is a bank account behind it, which is closely coupled with the bank account.
The emergence of digital currency is the inevitability of historical development, the result of the joint effect of technological progress and economic development, and the need for economic digital development. From the perspective of technological progress, technological developments such as cryptographic algorithms, mobile Internet, big data, cloud computing, blockchain, terminal storage, and artificial intelligence have laid the technical foundation for the emergence of digital currencies.
From the perspective of economic development, with the development of the economy, various payment and settlement behaviors become more frequent, and the amount of currency required will become larger and larger. The gradual replacement of banknotes with the legal digital currency of the central bank can effectively save the design and printing of paper currency issuance. The cost of production, issuance, and withdrawal will help reduce currency operating costs. From the perspective of digital economic development, the development of each era has a corresponding currency form. The physical currency and precious metal currency of the agricultural economy era, the paper credit currency of the industrial economy era, and the digital economy era also need digital currency to improve financial infrastructure. To better serve economic development.
China's digital currency issuance still adopts a two-tier operating system, which focuses on replacing the circulating cash M0. As far as the actual situation is concerned, the two-tier operation system of the central bank and commercial banks is adopted in the issuance of digital currency, that is, the central bank's digital currency is issued to commercial banks, and the commercial bank distributes digital currency to the public. This approach can help make full use of the advantages of the central bank and commercial banks, make full use of the resources, talents, and technology of commercial banks. It can also effectively avoid the competitive relationship between central bank digital currency issuance and commercial bank deposit currencies. Especially from the perspective of credit currency creation, commercial banks need to use loans to create deposits to create credit currency, which also requires a two-tier operating system in digital currency issuance.
At this stage, the central bank's digital currency focuses on replacing the cash M0 in circulation, and the equivalent exchange with paper renminbi, rather than replacing the narrow currency M1 and the broad currency M2. This is because the narrow money M1 and the broad money M2 have basically realized electronic or digitalization. It is also the central bank's digital currency that mainly focuses on replacing the cash M0 in circulation, so interest should not be calculated and paid for the central bank's digital currency. At the same time, digital currency mainly replaces M0, so it is more aimed at retail, and has less impact on inter-institutional and large real-time transactions.
In contrast, while the advantages of digital currency are obvious, there are also some problems that need to be studied in depth. From the perspective of advantages, in addition to reducing some of the operating costs of paper currency, the central bank’s digital currency has the following advantages: From a micro perspective, digital currency adopts a controllable and anonymous method. The central bank can query and track transaction records, commercial banks, and payment Institutions, etc., cannot query transaction information, can truly realize peer-to-peer transactions, and realize the payment of goods in real time, which also helps to protect personal transaction information and privacy.
However, under the real-name account management system, there is a tight coupling relationship between mobile payment and bank accounts, and the need for anonymous payment cannot be truly realized. It is also the controllable anonymous transaction that allows the central bank to grasp currency transactions and other information, which is helpful to the development of anti-money laundering work.
From a macro perspective, the central bank can accurately measure currency volume, currency structure, currency circulation speed, etc. through digital currency issuance, etc., to provide a more detailed and accurate data basis for macro-control, thereby helping to improve the money supply control mechanism and improve macro-control . At the same time, we must also recognize that the promotion and application of digital currency may face new financial supervision and other issues that need to be studied and resolved, and the impact on commercial bank payment and settlement, customer service, inclusive finance, and product innovation also needs to be studied and resolved.
In short, digital currency is the cornerstone of the development of the digital economy. The development of the digital economy and the promotion of digital development have become an irreversible trend. The gradual replacement of paper currency by digital currency has a solid technical foundation and is more adapted to the needs of future digital economy development.
The People’s Bank of China is at the forefront of the world in digital currency research and development, and it is more necessary to earnestly implement the important instructions of the General Secretary on actively participating in the formulation of international rules for digital currencies, to seize opportunities in the application form and technical standards of digital currencies, and to build Strive for the initiative in international competitive advantage.
As an important part of financial infrastructure, digital currency will also play an active role in improving transaction efficiency, protecting consumer rights, maintaining financial stability, optimizing macro-control, smoothing economic and financial operations, and improving social governance, thereby promoting economic growth. Quality development promotes the construction of Digital China.