The arrival of the digital RMB era
The "Banking Law" stipulates that the renminbi includes physical and digital forms, which provides a legal basis for the issuance of digital currency. The launch of multiple tests of digital renminbi means that the research on digital renminbi has achieved initial results, and the follow-up is expected.
Digital RMB operation model
Digital Currency Electronic Payment (DCEP) is the digital form of RMB, which is equivalent to cash (M0) in the currency definition. The digital renminbi issuance model adopts a "two-tier operation" structure, in which the upper-level delivery channel is the central bank to commercial banks, and the central bank will wholesale digital renminbi to commercial banks in accordance with the 100% reserve system;
The lower-level release channel is for commercial banks to public users, and commercial banks provide the public with equivalent amounts of cash or bank deposits to exchange digital renminbi services.
The "two-tier operation" model focuses on central bank currency issuance, consolidating the currency sovereignty, giving full play to commercial banks' operational advantages and market resource allocation functions, and building a harmonious and common currency circulation system of "central bank-commercial bank-public".
The carrier of digital renminbi circulation is the digital renminbi wallet. When opening an account, only the user’s personal identity is required for authentication. Point-to-point transfer transactions with other users can be realized without going through the banking system, which greatly reduces the dependence on financial intermediaries. To improve the confidentiality of transaction information and cash turnover rate. However, the individual digital wallet of the user still needs to complete the transaction through the banking institution when withdrawing money or recharging.
Customer loans and corresponding cash management deposit accounts are still in the form of electronic money, and will only be converted into digital renminbi at the request of customers. During the exchange, the bank transfers its digital renminbi to the customer’s digital renminbi storage wallet, and at the same time, the digital renminbi assets and electronic renminbi deposit liabilities will be eliminated from the bank table. In the future, the digital RMB wallet may be connected with electronic wallets provided by commercial banks and other payment service platforms such as Alipay and WeChat Pay.
Advantages of digital RMB
The digital renminbi has the same value and purchasing power as the real paper renminbi. The digital renminbi also needs to be transferred from your bank card and placed in the digital currency wallet on your mobile phone. When you go shopping or consume, you only need to use your mobile phone. The digital currency transfer payment in.
Digital currency does not have the printing and encryption costs of paper currency, there will be no damage, pollution, etc., nor will it be burned, and only its own password can be used when used, and every payment is recorded. Compared with WeChat and Alipay, digital renminbi does not need to be bound to a bank card and can realize payment without internet. In addition, the digital renminbi also has different characteristics in terms of the reserve fund system and interest calculation.
Progress of my country's Digital RMB Promotion
China's digital renminbi has been prepared since 2014 and accelerated in 2019. In 2020, the Central Bank’s Digital Research Institute officially announced the first batch of pilot "four places and one scene", including Shenzhen, Suzhou, Xiong’an, Chengdu, and the Winter Olympics scene. The pilots have all landed. In 2021, the second batch of digital RMB pilot projects will include Shanghai, Hainan, Changsha, Qingdao, Dalian, and Xi'an.
Digital RMB pilot areas, scenarios, and forms are gradually expanding, and payment models are constantly being updated. Digital currency can provide loans, wealth management, insurance and other online financial products on the user side; the enterprise side can provide value-added services such as digital marketing and supply chain management. . "Properly launching digital RMB pilot tests" will become one of the ten key tasks of the People's Bank of China in 2021.
(Source: Qianzhan Industry Research Institute)