Source: Duan Siyu, China Business News
The 2020 epidemic has accelerated the process of currency digitization worldwide: The People's Bank of China, which initiated digital currency research and development, piloted digital renminbi in multiple cities; the Ubin project involving many central banks and financial institutions completed a five-phase test that lasted about 4 years; The controversial digital currency Libra turned into Diem will be officially launched in early 2021; while Bitcoin has soared all the way, and the price has hit new highs continuously, once exceeding $40,000.
With the upgrading of technology and the improvement of supervision, digital currency will also usher in more room for development. On January 19th, at the 2021 Asian Financial Forum CBN Special "Future of Digital Currency" forum, a number of experts from financial institutions and the field of science and technology conducted a forecast and judgment on the development of digital currency. Participants generally agreed that there is a lot of room for future digital currency application scenarios, especially in personal consumption scenarios, which will help regulate the use of funds and improve the traceability of funds.
There is plenty of room for application scenarios
As an important part of digitalization and digital economy, since 2020, many countries around the world have accelerated their digital currency layout. Yang Yanqing, Dean of CBN Research Institute, gave an example at the forum that the digital renminbi of the People’s Bank of China in Shenzhen, Suzhou, Xiong’an New District, Chengdu and future Winter Olympics will conduct internal closed pilot tests in 2020; Singapore blockchain payment project The fifth stage of Ubin has been successfully completed and is ready for commercial promotion.
With the gradual landing of digital currency applications, discussions around its application scenarios have also gained more hands. In the opinion of the participants, the future digital currency will not only be applicable to the C-end, and bring huge changes to the personal consumption system, but also extend to the B-end, enabling the high-quality development of the industrial Internet. At the same time, as the key support for the transformation and upgrading of the industrial economy, the Industrial Internet will also provide a new fulcrum for stimulating the vitality of the digital economy and promoting sustained economic growth.
Specifically, in the retail sector, Bank of China Chief Scientist Guo Weimin said that the feasibility of my country's digital currency has been fully verified in certain scenarios, and there are many innovations in technology, such as "hard wallet" and "dual offline" payment models. However, it cannot be ignored that the use of digital currency in some areas is still urgent.
"From the simplest perspective of personal consumption payment, during the epidemic, many physical stores have difficulty in survival, which brings about a prominent financial problem. The prepaid cards they issued originally present risks. Many of them are like companies evading debts. The amount involved is quite large." Guo Weimin said, this is actually a very good application scenario of digital currency. Compared with other electronic payment methods, digital currency can provide traceability of fund use and regulate the use of funds.
Not only in the retail sector, this kind of fund traceability is also applicable to the public domain, which helps companies solve the problem of difficult financing and expensive financing. However, this is just a small cut in the application of digital currency on the B side. With the steady progress of research and development and testing, the market space of digital currency on the B side is full of more possibilities.
Senior technology industry analyst Huang Leping said that there are two major changes at the current industrial level in my country. One is that the energy system is shifting from a centralized system to a distributed system; the other is that the automotive industry is changing from a traditional transportation tool to an intelligent one. Terminals, and current payment methods cannot meet the demands brought about by these changes, so it provides more space for digital currency and payment.
For example, after the realization of intelligent network connection in the automotive field, a large amount of data will be formed. Then how the data in these terminals is connected to the financial system, including what role smart contracts can play, remains to be seen.
According to Zhou Ziheng, director of Zhejiang Modern Digital Finance Research Institute, with the introduction of digital currency, a "currency duality" situation has been formed. Compared with other currencies, central bank digital currency does not pay interest. The main solution is to solve the problem of remote payment, such as docking the expanded version of the RTGS system (real-time full settlement system); at the same time, it supports decision-making activities, which can connect digital currency with digital economy and artificial intelligence.
Still facing multiple problems
In fact, from the perspective of payment modernization, the needs of different digital currencies in different countries are different. Zou Chuanwei, chief economist of Wanxiang Blockchain, said that these needs mainly include: improving the wholesale payment system (mainly RTGS); providing fast payment services for retail users; improving the efficiency of cross-border payment; adapting to the needs of the development of the digital economy (especially without Access to payment requirements); promote fair competition in the retail payment market; promote financial inclusion; protect user data privacy; effectively implement anti-money laundering, anti-terrorist financing, and anti-tax evasion.
Based on this, Yang Yanqing said that the global central bank has divided into two technical routes in the process of promoting central bank digital currency, one is a retail route, mainly in China; more central banks are taking a wholesale route, two routes There are many differences in the actual landing process.
So for China, what problems does it face in practice? Guo Weimin said that the primary concern may be the cost issue, that is, will the cost of the central bank's digital renminbi be lower than that of traditional payment methods such as QR codes or cash? In his view, the current stage is definitely not, because to ensure the security and availability of digital currency, the initial investment is inevitable, which means that its current cost may be higher than traditional methods.
Yang Yanqing believes that the cost of digital renminbi can be analyzed from two perspectives. One is to compare it with. If the central bank's digital currency replaces cash in the end, then it needs to be compared with the cost of operating cash from the original global central bank instead of and Compared with QR code payment; second, there is a one-time fixed cost investment in digital renminbi. As its use becomes more popular in the future, the cost will also be apportioned, and the more apportioned, the smaller the cost.
In addition, Guo Weimin also mentioned that one of the challenges facing the digital RMB is that the world is currently entering the era of negative interest rates. “In the era of negative interest rates, digital currencies will bring about the value problems of commercial banks themselves. To over 65%, if the digital currency comes and the bank only covers the payment and settlement process without clearing, what else can the bank do? That is, if the bank only provides payment services, how can the basic value of a rational intermediary be renewed? definition?"
Furthermore, the industry is also generally concerned about whether the emergence of central bank digital currencies will bring about "narrow banking" effects. In this regard, Zou Chuanwei said that the narrow meaning of a bank is that on the asset side of a commercial bank, what corresponds to deposits is completely deposit reserves or treasury bonds. For example, if the required deposit reserve ratio is 100%, a narrow bank will be realized. In a narrow bank, if the bank lends, it has to use the equity capital, which degenerates into an unlevered loan company in the loan business. In this case, loans will not derive deposits, banks will not participate in currency creation, and depositors will not encounter risks due to loan losses.
Zou Chuanwei believes that central bank digital currencies, including DC/EP, and narrow banks are concepts at different levels. Central bank digital currency does not necessarily lead to narrow banking. What needs to be noticed is that the "100% reserve requirement" of DC/EP is not the same as the "100% reserve requirement ratio" in the narrow sense of banking. The former refers to the issuance of DC/EP with 100% reserve support, and the latter refers to the ratio of commercial bank deposit reserves to deposits.