Zhou Xiaochuan's latest speech: If piloting digital currency, you should consider 100% cash payment

In recent years, IT technology has developed rapidly, and big data, cloud computing, network infrastructure, and mobile Internet are all developing rapidly, especially in the recent hot blockchain technology. The current word used by the financial community is FinTech, and recently BigTech. In addition, due to the variety of financial services generated by new information technologies, there are P2P online loans, crowdfunding (crowdfunding), and electronic payments. In short, technological advancement will transform traditional financial business, and it will bring a lot of new financial business. At the same time, it also puts forward many new challenges and new requirements for public policy, which will lead to many new changes in public policy.

After two years of discussions between the International Monetary Fund (IMF) and the Bank for International Settlements (BIS), BIS published "BigTech in finance and the challenge to public policy" at the end of 2018. The report highlights the impact of BigTech's development on public policy. For my two-hour lecture today, the scope of the public policy proposed in the report is too ambitious. I think it is still focused on the financial policy part of public policy.

In recent years, China's financial technology has seen a lot of new content especially in electronic payment. The central bank and the regulatory authorities have also taken some new actions accordingly, especially the establishment of the Digital Currency Research Institute to carry out digital currency research and 2017. The suspension of the ICO business and the trading platform of Bitcoin in China have also attracted great attention from the international community. These events have led to international hopes to understand what China is, what the Chinese financial management authorities are concerned about, and what is the starting point for policy making.

General principles of financial policy for the development of new technologies

The financial industry is essentially the information industry. The financial industry regards information processing as a means and a tool, a technology support for finance, and it does recognize that the financial industry relies heavily on the development of the information industry (IT). Some people in the IT industry believe that the financial industry is the information industry. First of all, what the financial industry handles, in the early days, there are things like cash, gold, safes, etc., but more than 90% of the money is M1 and M2. Because of computerization, they all become numbers in computers. expression. Secondly, the pricing of financial products, whether it is the loan interest rate or the deposit interest rate, depends to a greater extent on the analysis and decision-making on the basis of data, and is basically an information processing industry. Once again, financial transactions, if you go to the Shanghai Stock Exchange, the Shenzhen Stock Exchange and the foreign exchange trading center, you know that basically all data processing and network communication are working, so that the trading floor has become unnecessary, reserved or for Sometimes you can visit it for a commemoration; or sometimes it is a place for a meeting to engage in activities.

In addition, from the perspective of the IT industry, IT has a user interface. It can be considered that the banking and securities company business outlets are equivalent to the user interface of the IT system, and the information of the terminal screen is used to deal with the user, but the core system is IT, including ATM is also an interface for information systems to interact with users. The development of IT technology has had a huge impact on the financial industry. From the development of China's four major banks after the Asian financial turmoil, it can be seen that any bank that has a good IT, or investment in a large system, will develop rapidly. In short, no matter from which point of view, the relationship between the financial industry and IT is too close, so we must attach great importance to the impact of the development of IT technology on the financial industry.

The formulation of financial policies must be very sensitive to new technologies, and must be highly supported. At the same time, the development of new technologies is highly uncertain and requires tolerance and failure. Because new technology applications will fail, and some technologies have not yet been put into production or are not used well, they have been replaced by another technology. What is the current enthusiasm for the future is hard to say. For example, in the late 1980s, the People's Bank of China was soberly aware that Telecommunication was a core key to the future banking industry (including the central bank), so it began to catch satellite communications. At that time, there was no good technology for terrestrial communication. The transmission power, reliability and cost of terrestrial communication were not good at the time, so satellite communication was carried out and it was necessary to start from the satellite ground station. However, the 400 C-band satellite stations designed by this system have not been laid, and the supporting equipment system has not been fully built. It has been replaced by the later KU-band satellite communication and later coaxial cable and fiber-optic ground network. This shows that the application of new technologies is risky. To be tolerant, the development of application systems must advance through the use of these new technologies, which may fail or be spent. This situation has a large number of examples in financial technology applications.

I visited the data center of a bank in the world in the early 1990s. At that time, there was a word called "disk farm", which means that there are large factories (about a few football fields), called "farms". All are put into disk groups, used as data storage. As a backup to the disk, thousands of tape cartridges are needed as a more massive but slower storage support, and robots or robots are specifically designed for this storage support. A machine was at a price of 100 million yuan at that time. This was the technology of the late 1980s and early 1990s, but it lasted for five or six years and was replaced by the so-called early cloud storage.

The financial industry must keep a clear head on its own technology needs, and it is not easily influenced by the marketing propaganda of IT suppliers. In the process of technological development, people who engage in technological innovation will promote their new inventions, new creations, and new products. Of course, the purpose of propaganda is to hope others to buy, and the financial system has always been a big buyer of IT technology. The largest companies in the world of IT technology supply, the most important thing is the financial industry customers. With the emergence of social networks, video, etc., the proportion of banking systems in information traffic has declined. However, the financial system is still a big buyer, so IT invented new products and pushed the financial industry to a large extent. of. Some innovative technology inventors often emphasize that this is a revolutionary change, a subversive innovation, or a national security. In this regard, the financial industry itself needs to have a sober judgment, not to miss or to misjudge disruptive innovation.

At the same time, from a global perspective, despite the rapid development of technology, there are not too many truly disruptive innovations. Most of them are a kind of so-called linear development, which is step by step. Of course, it also includes logarithm. Linear development. If there is a subversive innovation, not only in the application of technology, but also in the framework of the entire social structure, including public policy and the existing financial regulatory system will be fundamentally subverted. Of course, there may be a blurring of the boundaries between the two, which is not entirely clear. Although the supplier's desire to promote new inventions and new product manufacturing, as well as the desire to put it into practice, is understandable, we still need to have a clear understanding of this.

Of course, we must also be aware that there are sales and bribery, wars, and political lobbying in the cognitive society. In fact, some of the largest financial institutions in charge of the vice president of technology or the chief of the science and technology department, around the source of various suppliers, they use a variety of means to promote their products. In the corruption cases arrested in recent years, there have also been cases of receiving and selling bribes for technology products. Marketers often exaggerate the performance and necessity of their products, as well as the revolutionary and disruptive changes that products can bring. In addition, there will be practices that exclude competitors, including when introducing domestic chips and domestic encryption products, it may be said that other manufacturers' products have a very negative impact on national security. It is true that national security and information security should be highly concerned, but perhaps there is no exaggeration. In fact, its practice is not yet strong enough in terms of catching up with its own technology. It is hoped that it will block competitors through administrative measures, and this tendency should be paid attention to.

Some people have tried to influence the policy through the media and public opinion wars, and even used the water army to fight online public opinion wars. Looking at it seems to be the content of product and technology innovation, but the hidden benefits behind it are not simple. There are similar situations in other countries. The Central Asian Black Sea Balkan Central Bank Club once had a discussion about the issue of the network giant oligarch, mainly about how some IT companies and network giants have had a great impact on politics, and politicians who need votes How to actively link with them. Many political lobbying influences financial policy, including the procurement and application of financial technology.

The choice of technology is uncertain, and it should rely mainly on private R&D strength and rely on market competition to optimize and update. In terms of policy making, the overall need to be keen, supportive and tolerant of IT. The optimization of technology depends on the power of the market and the people. There is uncertainty in technology choices, no one can predict and be accurate beforehand, and technology choices are likely to be mistaken. Looking back at history can illustrate two issues.

First, from the development process, as mentioned above, most of the technological developments are actually linear development, or gradually evolved and updated along the historical footprint, such as big data and cloud computing. Second, the issue of technology selection can be studied through history. Although the financial industry is "rich and financial", the most advanced things are dare to buy, but there is still a lot of uncertainty in the choice. Mistakes in the choice of a business organization are relatively easy to accept, but if it is a government choice or a central bank choice, there is a significant reputational risk if it is mistaken. From the perspective of the financial sector, the central bank and the regulatory authorities pay particular attention to reputation, especially the central bank. Because the reputation of the central bank is not only reflected in the technology route, but more importantly, it is related to the reputation of monetary policy. Monetary policy is largely to communicate with the public and to convey the stability of currency stability and financial stability. If the reputation of the central bank is lost, including in the case of digital currency, if there is a loss of reputation, it is likely that its impact is far from being measured by the damage of investment and the retirement of the technical system.

The central bank must seriously consider its role in technology selection. The first is the supply of technical capabilities. When new technologies emerge, everyone is motivated. The central bank and the regulatory authorities will also be motivated, but it is necessary to see the real strength and the ability to attract talents in the market and in the private sector. One of the most important tasks of the central bank is to help build a competitive environment, so that the best technology can be successfully highlighted and developed, and better technology can be applied through competitive selection. It is also possible that the whole process in the future is a dynamic process. This dynamic process does not have the final winner, but because the speed of progress is very fast, which makes a technology occupy a large market share at a certain stage, but there will be another New technologies came out, and the waves pushed forward one after another. And it is possible that two or three technologies are dominant at the same time, but it is not obvious who can have an absolute advantage.

This is also a common phenomenon in technology, and it is possible to produce a coordinated, universal, and switchable method in the middle. When China began to develop color TVs in the 1970s, there were three main types of color TVs: NTSC in the United States, PAL in Europe, and SECAM in Russia and the Middle East. China was right at the time of choosing the technical system, but it was not easy to choose, because the choice must be given, and once it is finished, it will not be changed. At that time, China chose PAL. Later, the electronic technology capability was improved. There was an automatic switching IC chip that could unify the three systems. The problem was solved. The same is true for mobile phones. The second-generation mobile phones to third-generation mobile phones have GSM systems, CDMA systems (code division multiple access), and multiple access technologies are divided into CDMA, TDMA and FDMA. At first, GSM and CDMA were either one or the other. Later, a mobile phone was dual-card dual-standby, and the problem was solved. Therefore, it is possible to have two technologies at the same time, or to compete, and there may be some unified integration or switchable compatibility measures in the process, so that they can coexist.

About BigTech

Due to the existence of the network effect, the “winners take all the time” will lead to a huge change in the way of competition, and the regulatory authorities should guard against and cope with the negative impact of “winners take all”. "Winners eat all" will lead to a huge change in the way of competition. The performance of this change in China is to grab traffic first, first to grab the click rate, and then to grab traffic, grab customers, grab share, and account for the big head. A large amount of "burning money" appeared in the process of grabbing traffic. In this regard, we propose to refer to the World Trade Organization (WTO) on anti-dumping and countervailing practices to cope with fair competition. If you use dumping and subsidies to seize market share, first realize yourself as a “winner” and then knock out or merge other competitors. This will lead to unfair competition and may cause major market distortions. Will cause losses afterwards. This loss is generally limited in the industry, such as in the shared bicycle market. But if it happens in the financial world, this loss may be unbearable, and may even trigger a financial crisis.

From the perspective of subsidies and low-cost dumping, the concepts used by the WTO are Countervailing and Anti-dumping, but there are also many specific distinctions. At present, because the world is concerned about WTO reform, the concept of subsidies is also very concerned. A subsidy is a government subsidy. Some of this subsidy is allowed. For example, based on social purposes or poverty alleviation, if subsidies that have a major impact on the competition order are generally not allowed, they are divided into green box subsidies on agricultural subsidies. , yellow box subsidies, red box subsidies, clearly stipulate which are prohibited, which can be studied, and which are allowed. Another kind of subsidy is cross-subsidy. Cross-subsidization has always been a big concern in transition countries. For example, if an export product has no financial subsidies in name, or there is no indication of financial subsidies, but there are actually subsidies on inputs ( Including energy, raw materials and other inputs, the final international competitiveness is also subsidized. There are direct subsidies and cross-subsidies for “winners to eat”. Direct subsidies now rely more on “burning money”, burning money, burning ABCD rounds of financing, and finally burning IPO money. This money can be used first to burn, to grab traffic, to account for market share, as to how to say it later.

There may be two situations in the future: one is to push down the opponents, the market share is large enough to reflect the economies of scale, and perhaps to survive; the other is that after the opponents are beaten, they can raise prices. If it fails, the last is a chicken feather, I don't know who to look for. Cross-subsidization is equivalent to using other products to subsidize products that have to seize the share. A similar phenomenon can be observed in the payment system. In the beginning, in order to grab customers, the customer's payment of funds may be used to subsidize the price reduction of the product; or vice versa, if the product sales make money, the reserve fund for attracting customers (from The bank transfers to the payment system reserve fund), and can also subsidize the income of the wealth management business, allowing customers to gather it. These methods are not surprising in the industrial field, and have been repeated, but the amount involved in the financial sector will be very large. Therefore, everyone has seen that unfair competition and distortions in the industry often do not cause too much shock; and the consequences of the financial system are very serious. For example, the problem of Yunnan Pan Asia, the problem of E-rental, and the fact that there are probably a high percentage of thousands of P2P online loans that can be seen today cannot survive, leaving huge problems of liquidation. Therefore, we must stay awake and attach great importance to fair competition.

China once occupied a large proportion of “mining”, such as ICO and Bitcoin trading volume, which accounted for a large proportion of the international market, which will definitely cause regulatory authorities to protect the health of financial markets, consumers and investors. Some concerns about financial stability. At the beginning of the digital currency, most people expressed full curiosity and enthusiasm. Later, two problems were raised: First, bitcoin transactions showed significant ups and downs; second, speculative and technical abuse. From a speculative point of view, many people simply cannot figure out what the digital currency is and may be deceived in the middle. Therefore, from the perspective of protecting investors, the central bank and the regulatory authorities need to pay close attention to it. However, from the scale of the time, because there are fewer people involved, it is not enough to cause some kind of systemic harm.

As for the technical problems, one of them is that the blockchain does not have the TPS (Transactions Per Second) at the speed of the imagination to reach a payment system that is far enough to support retail transactions, but can do some small Pilots in scale financial market transactions or other applications. Therefore, the blockchain currently being promoted by the People's Bank of China is used in two low-TPS trading markets: one is a ticket transaction, and the other is a letter of credit financing transaction. L/C financing is a relatively small market, and counterparties should understand each other and there is not much regulatory necessity. If you do not pay enough attention to and test the stability and reliability of new technologies, it will hurt investors or consumers. For example, although Bitcoin claims to be technically strong, it still has technical flaws and mistakes, resulting in the theft of bitcoin information in Japan, and some customers' bitcoins are missing.

Also mention anti-money laundering, counter-terrorism financing and other requirements to prevent abuse of new technologies. At present, the more important abuse problem is the various illegal transactions and payment problems in the field of deep network and dark network. Deep nets and dark nets involve quite a few aspects such as drugs, human trafficking, sex trade, forged documents, and arms trading. An important example is the “Fentanyl” problem that everyone sees in Sino-US trade frictions. Some of them are similar to the drug trade. They use online retail, and both the shipper and the receiver are anonymous companies that operate on a single operation. That is to say, registering a company will do the same thing, and once there is no business activity. Bitcoin is used for transaction payments, and of course it can be other cryptocurrencies. This also poses problems for technology choices, and the central bank and regulators need special attention.

Financial policy choices facing multiple challenges

The financial market structure and regulatory landscape will be affected by IT technology. As a new entrant of the financial services industry, some financial technology companies have obtained licenses, and some have not obtained licenses. Others do not want to apply for a license. They want to do finance but do not want to be supervised. They do not want to bear the high costs of capital adequacy, various risk preparations and provisions. These new financial market entrants will not only have an impact on the market structure, but also have a major impact on the regulatory landscape. New entrants, especially BigTech, will have a more pronounced impact on the market landscape.

The other entrance is inclusive finance, or it is for inclusive finance. Some people have entered the financial services industry with the flag of Inclusive Finance, which has brought enormous challenges to supervision. A recent challenge is P2P online lending. When P2P first appeared, there were actually two questions (at least the central bank and regulators were in doubt). First, it is based on the fact that any rich person in the future can decide whether to lend by reviewing the borrower's information and credits. Some people predict that the bank will disappear in the future. Because everyone can do it, there is no need to engage in an agency to do it. This may be a "flicker" from the beginning, spreading a fantasy. Because the amount of information on credit is large, its professional work requires depth, and often individuals cannot complete it. In fact, people who lend money on P2P are often not interested in this very detailed information work, and most people just pursue returns. Second, the newly entered financial technology companies have also brought about regulatory issues, that is, whether they should be included in supervision. Since the international financial crisis in 2008, the global financial sector has clearly raised the issue of needing attention to shadow banking. So is China's P2P approach a shadow bank? At that time, the whole society was highly respected for "Internet +", and the leadership of each department was different. Some were particularly concerned about student loans, and some were particularly concerned about farmers' loans, but they did not care about finance. Therefore, the domestic authorities have indeed encountered pressure from public opinion, so the pressure on the regulatory authorities is relatively high. Under this circumstance, the strategy adopted by the regulatory authorities is to only supervise the licensing authority, who is applying for a license from me, and I have given the license to me, otherwise I will not care.

In this regard, many people have clearly stated that this is not the case. Since it is a shadow banking, that is, a banking institution that does not have a license, if it does not matter, it will be similar to the problem that occurred during the international financial crisis, so this is not the case. of. However, the regulatory authorities feel that the pressure is high, so they don't want to manage it. Similar liability issues have also occurred on the issue of illegal fundraising (when the problem has not been made so big). Later, an inter-ministerial joint meeting was established, and the final decision was to let the then CBRC take the lead. That is to say, public policy issues have arisen. Although everyone can push it, there is still a department responsible. Recently, P2P has a situation of “one chicken feather”. The amount of problems reported by the provinces is very large. Who is responsible for this matter? Finally, the Banking Regulatory Commission is responsible for supervision. Therefore, the development of IT has brought challenges to the market structure and regulatory structure.

Financial licenses and regulatory games. The access policy defines where the boundaries of the financial industry are, who is the financial industry, and who is not the financial industry? In the past, some industries in the financial industry were also quite confused. Who is the securities industry, who is the insurance industry, who is the banking industry, and who is the trust. These divisions have always been a bit of a headache. When it comes to BigTech, they are more likely to fish in troubled waters. For example, in the initial payment industry, the first third-party payment license was given to Alipay, and later Alipay hanged the balance treasure, so it began to be controversial. Is the money in the balance Baoli calculated to pay the reserve or deposit? This involves the issue of supervision by the CBRC. If you want to make a deposit, you need to bear the requirements of deposit reserve and deposit insurance. Yu'ebao later hanged the Tianhong Fund, and the Tianhong Fund was placed under the supervision of the Securities and Futures Commission. In this way, BigTech can choose in the middle of the regulatory department's policy, and whoever's policy is good for me depends on who. Therefore, there are many specific problems between the border policy and the licensing policy. The motivational problem is that FinTech and TechFin don't want to get a financial license, but also want to do financial business, because this is the most cost-effective. After the reform of the commercial system, the registration of ordinary companies can be taken in a day or two, capital is not required, and other requirements are very loose, and classified financial licenses are difficult to obtain and costly, and subject to stricter supervision. .

Although we initially proposed that financial regulators should be keen, supportive, and tolerant of the development of new technologies, the regulatory authorities may not necessarily have sufficient scientific knowledge and clear scientific foresight in the initial stage of whether or not to issue licenses. Therefore, it is really difficult to issue a license. If it is not issued, it may suppress the development and application of some innovative technology. Therefore, if you want to support, tolerate, or not to be a stumbling block, you need to use the licensing and licensing methods very carefully.

Incentive policy choices for different employment motives. In addition to licensing and licenses, perhaps the most important policy option is incentives, because incentives are a continuous policy (unlike licenses are a binary policy), regulation can adjust it, encourage what to do or discourage what to do, motivate A little more or less, whether it is positive or negative, can change continuously.

After several years of observation, the main profit model of many third-party payment institutions is eating spreads, and the real concern is to eat spreads. From the development of third-party payment services, it can be seen that many third-party payment institutions are less concerned about the efficiency and competitiveness of payment technology research and development and payment technology, and they are really concerned about the provision, which is plain. It is to absorb deposits. As long as the deposit is ready, it will make money, but the central bank and the regulatory authorities can adjust the spread. Should the reserve be strictly managed? How much difference can you give? If the spread is too big, it must be swarmed up; should it be made smaller, or even let it be zero, that is, only third-party payment companies are encouraged to rely on their own technology and efficiency to generate added value? In other words, the central bank can influence the motivation of the industry through the incentive mechanism included in the fund custody rules and interest policies, so that the company can survive and develop in the business.

More to prevent self-inflation. The money for the spread can't be put into the company's own pocket, because the other motive for eating the spread is more terrible, that is, self-inflicted, taking money for himself, and using it once the risk occurs, there is a breach of contract, money Can't get it out. Some P2P problems, and have a lot to do with self-melting. Like Pan-Asian and E-Tibet in Yunnan, it is possible to do a lot of self-inflicted things. E-rental is not only self-inflicted but also transferred to Myanmar. After that, some cases that are more serious than them have occurred, some of which have not been fully publicly reported and are still being processed. In addition, there are also some quasi-financial institutions that play the banner of popularizing the people's livelihood and developing the financial market. The final thing is to be self-inflicted. Self-inflict may also be divided into two types, one is the first is bad-minded, the money that stares at the customer's pocket wants to be self-sufficient; the other is that it really wants to do the inclusive finance at first, but the company's profit model is wrong, doing it. After doing the risk, there was a hole in the loss, so I began to misappropriate the client’s money and fell into self-inflation.

There is also an impure motive aimed at the capital market. I want to speculate on the market value. After doing multiple financings, I will finally carry out an IPO. After the IPO, I will flee at a high level. This is also a strategy on the market today. Examples of this type are Elisabeth Holme of California and LeTV of China. The strategy under this motive involves multiple links and it is difficult to manage with a license or license.

Interest transfer and exchange of interests are also an approach seen on the market. In exchange for benefits and exchange of benefits, other useful things are good for their overall business or personal. In addition to bribery and corruption, there is also an exchange, the transfer of benefits is the flow, market share, this is also problematic.

Therefore, we must do our best to suppress bad motives in the incentive mechanism. Such motives and practices are difficult to resolve through licensing and licensing, and should be resolved through the establishment of incentives. The design of the incentive mechanism must first prevent the third-party payment (or P2P, etc.) from playing the banner of financial services. The actual focus is on the money in the customer's pocket, the motivation is distorted, and the policy design should guard against this. In short, you must not mistake the incentive mechanism. If you make a wrong incentive mechanism, it is equivalent to setting yourself on fire.

The exit policy choice of the problem agency. A typical example of a problem with self-inflation is the purchase of a third-party payment company in Shanghai. This institution has misappropriated client funds and is unable to pay off. When the problem is exposed, it is probably short of 800 million yuan. What are the disposal policy choices at that time? The first choice, do you want to deal with the bank as a fund custodian? At the time, Bank of Communications felt very aggrieved, saying that we thought that the custodian bank was to build an account, and other custodian banks did not take it seriously. But the question is who will control who is going to do something. The second option, is it to allow mergers and acquisitions or let them go bankrupt? If you allow mergers and acquisitions, you may ask a BigTech to come in. For BigTech, it will cost a little more to buy a license, and will also propose other exchange conditions, including allowing the BigTech to carry out certain businesses.

Doing so will undoubtedly create moral hazard: First, when the company's business is messed up, there will be big companies to acquire, customers will not be aware of the damage, and those who do bad things will not get the punishment they deserve; second, the customer will I think that where the money is placed depends only on the high return, so that investors are not educated, and the market's selectivity is not reflected. Therefore, supervision should "kill chickens and monkeys." In the end, the choice for Shanghai's purchase and disposal was not to engage in mergers and acquisitions, and did not compromise the requirements of the merger and acquisition, but engaged in market exit and bankruptcy liquidation. Of course, this hole could have been filled by a BigTech, but it was not filled by it, but it was paid from the Central Bank Stabilization Fund, but it prevented moral hazard and provided positive education in many aspects. This is often done in history. In the Asian financial turmoil, the trust investment companies in Fujian and Taiwan, the historical burdens that were difficult to deal with when the four major banks were listed on the stock market, were actually the responsibility of the central bank to prevent the moral hazard of the transfer. Therefore, after the bankruptcy in Shanghai, the hosting of third-party payment has also been seriously serious. Finally, the market losers are removed from the disposal and strive to prevent moral hazard.

Strive to establish a fair competition policy system. If you want to judge by competition, which technology or business model is good and which is not good, first, to make the competition conditions as fair as possible, the gap can not be great, otherwise there will be problems. For example, small loan companies and P2P online lending platforms are established according to the purpose of inclusive finance, but P2P has no capital requirements in the past, and no one is actually responsible for supervision. Small loan companies explicitly require capital to be used mainly. If you make a loan, the leverage will not exceed 50%. In the end, which policy is good, it is hard to say, but at least the similar business is likely to have inequality in competition conditions, and there will certainly be some distortion or even arbitrage in the market. Second, the basic financial competitiveness depends on a common and consistent accounting system, including the measurement of major indicators such as capital, bad, loss, and provision, all based on accounting, so there must be a basic system. . Third, we must properly deal with the "winners take all", because "winners take all" will hinder the process of promoting the development of science and technology through competition and the selection of superiority. Only through the survival of the fittest under fair competition can the entire social and economic benefits be maximized. In this regard, the WTO can use the concept of anti-subsidy and anti-dumping to carry out necessary management of market competition order and pricing mechanism.

Of course, there will be many difficulties. At present, the voice in the industrial field is not high. Individuals propose that the price of sharing bicycles and drip taxis should not include subsidies. They do not burn investors’ money to subsidize and grab shares. But this kind of public opinion cannot take up the current public opinion. The upper hand, the relevant departments have no urgent motivation to manage this matter. However, in the financial system, the risk of this approach will be great, because the financial system is directly operated by funds, and the amount of losses caused by distorted competition may be very large, and the problem will be out of control. Some loss management problems have not been solved yet, like Pan Asia and E. Therefore, from the outset, we should issue relevant financial policies for cross-subsidy and “burning money” to grab market-oriented practices. Although this may cause some friction, it will produce a certain psychological contrast and cause complaints from the industry. It has been observed that the losses caused by the P2P network lending problem may be several orders of magnitude larger than the deficit caused by the collapse of a shared bicycle company, and the negative impact on the economy will be much greater.

In addition, the social responsibility of capital market institutions should be promoted. From the perspective of the venture capital industry, there should also be some financial policies to guide them to be more responsible for investment. If we take the money to support subsidies to occupy market share, the return on investment in VCs is not favorable, and the social construction of fair competition is not fulfilling public responsibility. Of course, when global liquidity is quite abundant, there is room for development from hedge funds to private equity funds, and the amount of money is so much that it is too much to spread. However, according to the rules of the securities market, whether it is equity financing or debt financing, the use of funds should be clearly disclosed. People hope that these funds will be used in technology research and development, equipment, and networks, rather than directly subsidizing customers to grab traffic and traffic. At least the financial community should adhere to this concept.

The issue of fairness in data collection and application. The first is Big Data. After using Big Data, how can I use the data? BigTech feels that it can provide public services for personal credit information to a wide range of industries. But at first, BigTech may prefer to serve the interests of the company. Therefore, it has been suggested that if you want to do public services, you should have a public spirit and obey public service constraints and norms. If the credit evaluation and credit scoring are only beneficial to the company, as long as the user buys his own things, he can give more points, or arrange other conveniences. In this way, attracting users will affect the fairness and the competition order of the credit reporting industry. . In addition, it also brings a problem. Borrowing the words that Americans like to use is the so-called "political correctness." In the United States, if discrimination against women is affirmed to be politically incorrect, discrimination against ethnic minorities is also politically incorrect. In China, if young people are encouraged to spend luxury consumption and borrow luxury consumption, the more luxury goods are bought, the more money they spend, the higher the credit score, which is probably politically incorrect. One of the situations is to borrow money from college students and finally evolve to encourage college students to over-consume. After the debt is over-represented, it will inevitably lead to another globally-recognized problem of lending. Usually, the way the lender feels simple and not legally responsible is the employment of the loan company. The violent or quasi-violent loan of the loan company is They are responsible for themselves. The death of college students in Shandong in the previous year was triggered by the public, which caused great public concern. This involves issues of political correctness and moral integrity.

Pay attention to how non-structural data is used. In the past, the credit information system used structural data, basically using the database, because the structural data is basically legal and compliant and politically correct. That is to say, it includes personally identifiable information, a history of lending, and whether there is a limited and non-controversial information. If you use conversations in social networks, or group components of social networks, you may have many new problems. For example, some people in big data companies have viewed a user's social network and found that his friends are rich, and the names are general managers, presidents, and generous parties, and they believe that the credit of this user is good; If there are too many poor people in the circle of friends, the credit is not good. This judgment is likely to have a big mistake, and it is politically incorrect and morally wrong. Therefore, if you want to provide big data services or public credit, you can explore the use of unstructured data, but you should use the model or algorithm to be transparent, subject to public supervision and evaluation, and there will be supervision by the regulatory department. Judging to judge whether this application is appropriate.

Another one is the traceability responsibility. After the accident of Enron, the five major accounting firms in the world became the Big Four. Andersen Company must bear the historical responsibility of mistakes and the related liabilities of investors. Similarly, credit reporting is also subject to public responsibility. In addition, the data will always go wrong, but through what channels and procedures can be changed, or can not always be changed? Due to the decentralization of network information and network propagation, it is often difficult to change data after an error. If there is a center, you can also make judgments. For example, if the judge decides that the information is wrong, it can be modified. But if it is a decentralized system, multiple distributed storage is difficult to modify. Some people constantly check their personal credit information systems, and they also have concerns about whether the information is correct or not. These all involve the legitimacy of data collection, application and market competition.

The controllability, opt-out and “sandbox” of the pilot. The controllability and opt-out of the pilot are linked to the “sandbox”. From the beginning, I heard that the "sandbox" has been a concept of dynamic change. The “sandbox” introduced by the Bank of England Governor at the BIS meeting emphasized the controllability of the experimental boundary and the complete restoration of the target system after the test, so that no additional losses were incurred. That is to say, people can do the pilot, but at the same time they need to be able to turn it back and finally recover without loss. Later, there were many conceptual descriptions and additions to the “sandbox”, and the arguments were not consistent.

For pilotability, one discussion object is the payment system. The first digital currency in a Swiss company was tangible (of course, tangible in terminal equipment), which was introduced a few years ago. At that time, the feeling was that the trial range was difficult to control. Especially China has a population of 1.4 billion, which is difficult to control. Therefore, the Swiss also believe that it is better to find a small country to experiment, because the evaluation and correction of small country experiments is easier, although the sandbox cannot be requested. "All restored, but the loss will be small. In fact, the difficulty of replacing small countries' currencies with big countries' currencies is very different. Some people complain that the renminbi is not printed beautifully and the materials are not advanced enough. In fact, the replacement technology is ready, but the renminbi exchange for a generation needs many years. Unlike some small countries of a million class, the first three months can be used for both new and old coins; from 3 months to 6 months, old coins can be exchanged for new coins at bank outlets, but old coins cannot be used in retail; After 6 months to one year, there are only two banks left in the country to exchange. In the future, you can leave a long tail. For example, you can only redeem it after the central bank has reviewed it, and it does not provide convenience. Such a replacement can take ten years to do in China, and the cost is huge, and it is difficult to restart if it is wrong. When I was still in the CSRC, one of the headaches was the fake ID card. In the 1990s, an ID card for someone to open an account could be received from a sack and a sack, mainly to manipulate the price. Therefore, the CSRC hopes that the Ministry of Public Security will be able to exchange a new generation of ID cards, but it will take 10 years to change the ID card. Therefore, if the digital currency can be used as a pilot for a small country, it will be safe to promote it in a big country after success and improvement.

Some Chinese are more gambling. Although we do not specialize in studying such laws, we have to admit that according to statistical observations, similar illegal fund-raising or excessive enthusiasm for gambling speculation is very likely to occur in China. After a product is developed, if it is easy to cause excessive speculation, or if more ordinary people will be deceived, and when the problem will be complained to the government and even protested on the streets, then such a thing is better to stop its operation. Or you can encourage pilots from small, limited places. For example, in 2017, the transaction between Bitcoin and Renminbi was stopped, and then a large amount of Bitcoin transactions flowed to Japan. To this end, how to protect consumers or how to protect retail investors should also be a policy content that must be considered in the pilot.

Encrypted digital currency or similar tokens should be considered for 100% cash. In recent years, when the People’s Bank of China spoke about this matter internationally, it has repeatedly cited examples of Hong Kong’s 100% reserve payment. Before the return of Hong Kong in 1997, Hong Kong had two banknote issuing banks: HSBC and Standard Chartered Bank. In the process of returning, Silver Hong Kong became the third banknote issuing bank. The currency of the three banknote issuing banks can be different. The ATM is completely unified and has certain difficulties. There are also some differences in the banknotes, recycling, distribution channels and banknotes of the three banks. Although the Hong Kong Monetary Authority requires uniformity as much as possible, it may not be 100%, but allows for common ground while reserving differences and slight competition. The most fundamental question is whether the banknotes of the three banks belong to the same value. It depends on the issuing of 7.8 Hong Kong dollars for each banknote issuing bank. One dollar must be handed over to the Hong Kong Monetary Authority as a reserve fund. The Hong Kong Monetary Authority will issue a provision. A certificate is issued whereby the banknote can be printed.

But there will be some technical problems, such as whether the temporary inventory is printed? Banknote M0 will be enlarged to M1 after circulation, or will it be prepared? In short, these are all related to whether the value of the currency can be stabilized. Therefore, we argue that if pilot digital currency or similar tokens are to be considered, 100% cash will be considered. However, there will be controversy immediately for those who create new coins, because they thought that printing banknotes is a matter of making money in white. If cash is executed, is it not a broken road? Indeed, printing banknotes should not be so easy to make money, but by paying for business services, embodying its added value, while also ensuring incentives in delivery, liquidation, system maintenance, clearing, redemption, etc. Furthermore, it is also necessary to consider the issue of the public interest. The payment institution should not only pay attention to the money in the customer's pocket, but also prevent the motive for absorbing the spread, nor can it be self-sufficient, and can't even want to make money directly by issuing banknotes. It is all the motivation that needs to be stopped. The transaction value of Bitcoin and certain cryptocurrencies has changed greatly, which has led to its departure from the regular payment business, which has aroused the attention of all parties. The industry has also begun to advocate stable currency and cannot rely on market transactions to form its value. But how is the mechanism implemented? Any organization has the possibility of managing a position, causing default or bankruptcy. The 100% reserve fund mentioned above is not only the stability that it claims to be, but also must have a solid quantity monitoring, custody rules and correct incentive mechanism to be truly implemented.

The design idea of ​​DC/EP (digital currency/electronic payment) promoted by the People's Bank of China. First, since we must support the development of science and technology, we must prevent problems. In the design of DC/EP, we should not pre-select a certain technology, but rely on distributed R&D, market competition, and respect for market choices. It includes improvements in account-based electronic payment channels, mobile payments such as code-based payments, and blockchain and distributed ledger (DLT)-like encrypted digital currency systems. Second, some different systems of technology may develop in parallel, and can encourage a number of collaborative development and rapid switching, but mainly to play market enthusiasm. It is not easy to know who is best beforehand. The big country central bank can also have its own system, but don't worry about entering the retail payment link, and don't think that you can do better than others. Third, the central bank needs to accurately measure accounting and establish custody rules to achieve 100% reserve to maintain stability while correcting incentives. Fourth, the pilot should still limit the scope as much as possible. The pre-existing design of exiting is like writing a “living will”. If there is a problem, how to withdraw? It must be designed in advance. Technology inventors and innovators may not be keen on this design, and the central bank should require it to do adequate design. Fifth, we must prevent burning by money and subsidies in disguise (including direct subsidies and cross-subsidies) to grab market share and distort competition.

In general, the impact of technological development has been great and there are many challenges. Today, it focuses on the challenges of financial technology to public policy, the interaction between technology development and financial policy. The most important aspect of financial policy is macro-control. The general industry will not consider any impact on macro-control, but macro-controllers must consider it. Macroeconomic regulation includes monetary creation mechanisms, solvency, risk prevention and financial stability. From a regulatory perspective, it is also necessary to care about cybersecurity, fraud prevention, privacy protection, anti-money laundering, counter-terrorism financing, etc. These issues also involve financial public policy, some of which also involve legislation. Therefore, in summary, we must emphasize the importance of supporting the development of science and technology, be keen and tolerant, especially through competitive mechanisms; at the same time, we must consider the applicability of existing measures and policies of financial stability and macro-control, the overall economy and consumers. Will not be affected by a big negative impact, especially to prevent fraud. It is necessary to consider universal benefits and focus on guiding the scientific and technological forces to exert positive energy through effective incentive mechanisms, that is, to improve financial services mainly through efficiency. As far as financial policy is concerned, there are many new challenges and new issues. We need everyone to study together and work together. At the same time, we can only continue to study in practice, constantly experience, and accumulate, so that we can do better.

(This article is based on the author's lectures at the Wudaokou Finance College of Tsinghua University on May 8, 2019. Although this lecture was 40 days before Facebook announced Libra on June 18, some of the analysis also applies to Libra. discussion)

Author|Zhou Xiaochuan, "The President of the People's Bank of China, President of the Chinese Finance Association"

Article | "China Finance" No. 15 of 2019

Editor's Note: Original title: "China Finance" | Zhou Xiaochuan: Interaction of Information Technology and Financial Policy