Interpretation: The central bank announced the acceleration of legal digital currency research and development, these four points must be concerned

The central bank held a video conference for the second half of 2019. The meeting requested that we should develop financial technology based on the situation, strengthen follow-up research, and actively meet new challenges. Accelerate the pace of research and development of China's legal digital currency (DC/EP), track and study the development trend of virtual currency at home and abroad, and continue to strengthen Internet financial risk remediation.

This indicates that the pace of R&D, pilot and promotion of China's legal digital currency will accelerate, and perhaps there will be a point where we will realize the application of legal digital currency.

First of all, although the development of digital currency is full of expectations, it also faces huge risks of wealth assets, which is a problem that must be considered.

When it comes to digital currency, many people may soon associate with Internet virtual currency. The most popular digital currency is Bitcoin, but in addition to Bitcoin, there are Litecoin, Infinity, Quark, Zeta, Roast, Penny, Invisible Gold, Red, Prime, and so on. Hundreds of digital currencies issued in the world.

However, the virtual currency is not a real currency. It is only a personal currency and an information currency. It has only uncertain value and relative value. Especially after the “roller coaster” type of ups and downs in the bitcoin market price, people’s understanding of the risk of digital currency was even more impressive.

Therefore, while expecting the central bank's legal digital currency, people are also worried about the security of personal wealth and assets represented by digital currency. This is a normal reflection and a problem that must be solved by a legal digital currency.

Secondly, China's central bank's research on digital currency has already started, and has made substantial progress, which has laid a certain foundation for the development of legal digital currency.

With the development of the Internet and the development of virtual currency, statutory digital currency issuance is a major trend in the digital economy. Central banks are considering that China's central bank has always been an advocate and a practitioner of legal digital currency.

On February 13, 2016, Zhou Xiaochuan, governor of the People's Bank of China, said in an exclusive interview with Caixin Weekly that “digital currency as a legal tender must be issued by the central bank, and blockchain is an optional technology.

The People's Bank of China has always adopted a supportive attitude towards digital currency and blockchain technology, and has actively carried out relevant research work. As early as the beginning of 2014, the central bank formed an expert research team to discuss the required regulatory framework or national digital currency.

In 2016, the State Council wrote the blockchain into the “13th Five-Year Plan” to strengthen the advanced layout of strategic frontier technology.

In 2017, the People's Bank of China successfully tested a digital block trading platform based on blockchain. The central bank digital currency research institute was officially listed in December 2017.

On June 15, 2018, the Digital Money Research Institute of the People's Bank of China also invested in the establishment of “Shenzhen Financial Technology Co., Ltd.”, whose business scope is “financial technology related technology development, technology consulting, technology transfer, technical services; financial technology related system construction”. With operation and maintenance."

On August 28, 2018, the "Nanjing Financial Technology Research and Innovation Center" and "People's Bank of China" were jointly established by the Nanjing Municipal People's Government, Nanjing University, Jiangsu Bank, the People's Bank of China Nanjing Branch, and the People's Bank of China Digital Currency Research Institute. The Institute of Currency Research (Nanjing) Application Demonstration Base was unveiled.

Third, the basic logical framework of China's central bank's digital currency and consideration of possible three major risks are extremely cautious and should be a responsible attitude.

China's legal digital currency continues to show progress and effectiveness. The logic of its development may be the parallel of multiple programs. Based on the difference between the concept of digital currency (BRS), the digital currency can be divided into the digital currency of the central bank and the private sector. Digital currency, as well as the digital currency of PPP (Public Private Partnership).

However, the delay in launching the legal digital currency reflects the difficulty of digitizing the currency and the cautious attitude of the central bank. After all, the legal digital currency is different from the general virtual currency, and its security and sustainability must be considered because digital currency and electronic payment exist. Three major risks: a new product, new technology as a speculative tool; second, some technologies over-emphasizing the circle of money, imitating the bank to absorb public savings; third, the winners take the opportunity to replace competitive development.

What is the legal digital currency positioning? The legal digital currency is not only a substitute for the current banknotes, but also a supplement and improvement of the current banknotes issued by the central bank. This is fundamentally different from the so-called general Internet cryptocurrencies, including general encryption such as Libra and Bitcoin. The digital currency itself does not have a monetary function. Because these currencies do not have the function of money payment, and they do not have a substantial distribution basis, and digital currency is not only legal tender, but also because if the digital currency is piloted, 100% cash should be considered.

 

Fourth, the research and development of the central bank's legal digital currency has a long way to go, and security is still the preferred target that must be considered.

The research and development of China's legal digital currency is based on the study of the mechanism and mechanism of digital currency, strengthening the possible impact and impact on various digital currencies. This is a challenge to various monetary supervisors since the development of the Internet; Second, the timely introduction of legal digital currency can be used as a supplement to statutory banknotes, thus forming a complementary pattern of complementary paper currency and digital currency; third, adapting to the new trend of the future digital economy, the legal digital currency will help to lose the development of the digital economy and The emergence of new value forms.

The development of China's legal digital currency is worthy of expectation, but the risks and problems must be paid enough attention. Unlike the value risks of general virtual currency and internet currency, the central bank's digital currency must consider the value of paper currency. At the same time, the security risks of money must also be fully considered.

Text: Yan Jian, senior bank senior management

Source: Mars Finance

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