On August 2, the central bank held a working video conference in the second half of 2019. The meeting proposed that we should develop financial technology based on the situation, accelerate the pace of research and development of China's legal digital currency (DC/EP), and track the development trend of domestic and foreign virtual currency.
Digital currency has always been one of the focuses of central banks. As early as 2017, China’s central bank has set up a digital currency research institute. In early July this year, Wang Xin, director of the Research Bureau of the People’s Bank of China, also said that the State Council has formally approved the central bank’s digital currency. R&D, the central bank is currently organizing market institutions to do the corresponding work.
According to the possible positioning of the legal digital currency issued by the central bank, Chen Wen, deputy director of the Center for Inclusive Finance and Intelligent Finance of Southwestern University of Finance and Economics, believes that the central bank's digital currency should be regarded as a supplement to the base currency. Many experts also said that the legal digital currency is a substitute for banknotes and will not affect legal tender.
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So what impact does this seemingly “stand-in” currency have?
Possible impact of central bank digital currency
Advantages of issuing legal digital currency in China
Insiders said that China has created the most digital assets in the world. In this case, China's issuance of legal digital currency has advantages and needs to make a difference in this field.
The industry insiders said that the advantages of issuing digital currency in China have the following two points:
1. The construction of financial infrastructure has the advantages of late development, small historical burden and high degree of digitization.
2. China has become the most active economy in the global e-commerce economy. The potential demand for end users to use digital currency is strong and the application scenarios are abundant.
Helps improve the effectiveness of monetary policy
Not long ago, the People's Bank of China Research Bureau Wang Xin said at the launching ceremony of the Digital Finance Open Research Program and the first academic seminar: The digitization of the central bank's currency will help optimize the central bank's monetary payment function and improve the central bank's monetary status and monetary policy effectiveness. The central bank can not only affect the bank deposit and loan interest rate by adjusting the central bank's digital currency interest rate, but also help to break the zero interest rate lower limit.
Wang Xin said that the central bank's digital currency (CBDC) can become an interest-bearing asset that satisfies the holder's reserve demand for safe assets and can also become the lower limit of bank deposit interest rates. It can also be a new monetary policy tool.
May act directly on businesses and individuals
Zhou Sand, CEO of Jingtong Technology, said in an interview: If the central bank wants to issue sovereign digital currency, the key point is whether to allow large enterprises and individuals to open accounts in the central bank system, and give storage interest.
Zhou Sha believes that, as a result, the central bank can better regulate monetary policy and set benchmark interest rates. Once the potential of digital currency is released, it may have an impact on the secondary system such as “central bank – commercial bank”. Monetary policy will directly affect enterprises and individuals. The monetary multiplier factor of commercial banks will disappear, and the commercial banking system will also shrink and be reduced to investment financial institutions or commercial lending institutions.
However, although China has the basic conditions for issuing digital currency, it still faces challenges such as the transformation of traditional financial facilities.
In response to the difficulties of the central bank in issuing legal digital currency, some experts said that if domestic digital currency is issued, it will face difficulties such as technology, the inability to freely flow under renminbi capital, illegal use of digital currency, and the transformation and upgrading of financial infrastructure. .
CBDC is becoming a new field of research and development by central banks around the world
According to public information, from 2017, the People's Bank of China Digital Currency Research Institute was formally established. As of August 4, 2019, the Central Bank Digital Money Research Institute applied for a total of 74 patents involving digital currency. Yi Gang, president of the People's Bank of China, once said, "China is at the forefront of the current global study of digital currencies."
Not only China, but also the multinational central banks, including the Bank of England, the Bank of Canada and the Swedish Central Bank, have already carried out research and development on legal digital currencies.
As early as 2016, the Bank of England issued a centralized digital currency RSCoin , known as the 'hybrid' digital currency. At that time, the Bank of England was one of the few central banks to develop its own digital currency.
In addition, the Riksbank has always been regarded as the world's oldest central bank. Previously, the Financial Times reported that the Swedish central bank may become the world's first central bank to launch digital currency. In recent years, the Swedish central bank has been working hard. Research on digital currency.
In June this year, Russian central bank governor Nabiulina said that the Russian central bank will launch its own digital currency one day. She said that the key to CBDC's utility is that technology must ensure "reliability and continuity"; technology must mature, including distributed registry technology. The Russian central bank will review the proposal to develop cryptocurrency. However, Nabirina added that the legal currency settlement system within the Eurasian Economic Union is improving, which provides “good momentum”. It is reported that the Russian House of Commons is also moving in the direction of passing cryptocurrency legislation.
On July 9, the Turkish government added the relevant content of the central bank's issuance of digital currency in its economic roadmap from 2019 to 2023. The 11th development plan proposed by the Turkish President shows that “the digital central bank currency based on blockchain will be implemented”. In addition to the central bank's digital currency, the development plan also lists the blockchains that will be used in the transportation and customs operations.
In addition, the Iranian media also reported on July 10 that the Iranian central bank governor announced that the Iranian authorities plan to authorize cryptocurrency mining. According to reports, the Iranian government has approved part of an administrative law that will authorize the exploitation of cryptocurrencies in Iran. Prior to this, Iran has had a long discussion over the legal status of cryptocurrencies.
Recently, the general manager of the Bank for International Settlements (BIS) Carstens also said that the global central bank may have to issue its own digital currency earlier than expected, and BIS also supports central banks around the world to work hard to create a digital version of the national currency. According to BIS's "Cautious Acting – Central Bank Digital Currency Survey" report released in January 2019, 70% of the central banks participating in the survey are participating in or will participate in the work or research of issuing central bank digital currency.
Up to now, there have been indications that the Central Bank Digital Currency (CBDC) is becoming a new area that central banks around the world are interested in researching and developing.
Sharing Finance: Cao Xiaoya