On August 2, the central bank held a video conference for the second half of 2019. The meeting pointed out that “ accelerate the pace of research and development of China's legal digital currency (DC/EP) , track the development trend of domestic and foreign virtual currencies, and continue to strengthen Internet financial risk remediation.”
The statutory digital currency has once again been put on the agenda, which has touched the hearts of many people in the industry. Everyone is very curious. What exactly will the legal digital currency launched by the central bank look like? We may be able to "see the leopard" from three directions:
First, at the business level, explore the historical trend of the People's Bank of China Digital Money Research Institute; second, the patent level, summarizing the content of the published patents; and third, the point of view , sorting out the opinions expressed by the principals of the central bank's monetary research institute.
Business | Mysterious "number of gold chains", explore blockchain + bills
In September 2016, with the approval of the Central Office, the People's Bank of China established a directly affiliated institution, namely the Digital Money Institute of the People's Bank of China. Based on the national strategic deployment and the overall working arrangements of the People's Bank of China, the Institute undertakes research and development, standard planning and other functions of digital currency and financial technology.
From the perspective of foreign investment, the People's Bank of China Digital Currency Research Institute established the "Shenzhen Financial Technology Co., Ltd." on June 15, 2018. Its business scope covers financial technology-related technology development, technology consulting, technology transfer, and technical services. Construction, operation and maintenance of financial technology related systems. Shenzhen Financial Technology Co., Ltd. invested in “Yangtze River Financial Technology Co., Ltd.”, which was established on March 1, 2019. Di Gang, deputy director of the Central Bank Digital Money Research Institute, is the executive director.
From the point of view of intellectual property rights, the Central Bank Digital Money Research Institute applied for a software copyright called “Several Golden Chain”. The registration approval date is April 12, 2018.
What is the golden chain? There is almost no public publicity, but the author found it in the magazine of the 10th issue of China Finance magazine in 2018. The title of this article is "Song Hanguang: The Application of Blockchain in Digital Bills."
The article mentioned: "The digital ticket trading platform experimental production system uses SDC (Smart Draft Chain) blockchain technology, with cryptographic algorithms such as homomorphic encryption and zero-knowledge proof for privacy protection, through practical Byzantine fault-tolerant protocol (PBFT) for consensus, using a see through mechanism to provide data monitoring."
In May of this year, Di Gang, deputy director of the Digital Money Research Institute of the People's Bank of China, also wrote in "China Finance" that "digital bills are a typical scenario for the application of blockchain technology." Because digital bills are naturally applicable to blockchain technology in terms of their own characteristics, trading characteristics, and regulatory requirements.
In addition, on June 13, 2019, the Central Bank Digital Currency Research Institute newly filed a website called “Digital Currency Research Internet Station” at www.pbcidm.cn, but the website is not yet online, and Babbitt will pay attention to it in real time. After the launch, let everyone find out.
In terms of patent applications, the People's Bank of China Digital Currency Research Institute has a total of 74 patent information, which is applied in 4 batches. In March 2016, 23 applications were filed. The applicant was “People's Bank of China Institute of Printing Science and Technology”; 34 applications were filed in June 2017, 13 applications were filed in December 2017, and 4 applications were filed in March 2018. Their applications People are the Digital Money Institute of the People's Bank of China.
Although no new patent applications were seen in the past one and a half years, on January 17, 2019, the Central People's Bank of China Digital Currency Research Institute issued a new batch of patent application agency procurement project announcements, winning agencies and the past 4 Like the batch, they are all Zhongyuan Xinda Intellectual Property Agency Co., Ltd. According to the 2018 IPRdaily Joint IncoPat Innovation Index Research Center, the “Blockchain Technology Patent National Agency Agency List” was published. Zhongyuan Xinda Intellectual Property Agency Co., Ltd. ranked second.
Patent | 74 patents, 3 highly repeatable keywords
Below we focus on the patent level. As you can see from the chart below, the core of 2016 is the “Digital Currency Chip Card” and 13 related patents; the core of 2017 is “Digital Currency Wallet” and 18 related patents; the core of 2018 is “Trigger based on XX conditions” The digital currency management method and system", all four patents related to this. Does this reveal the focus of the legal digital currency research?
(1) Digital currency chip card
Keywords: owner change role: digital currency chip card, commercial bank, central bank
In 2016, the core of the patents related to “digital currency chip cards” was to establish effective communication instructions between digital currency chip cards, commercial banks and central banks to complete the extraction and storage of digital currency, digital currency and physical cash. Redemption, as well as the payment of digital currency in online and offline state, will result in “ownership” changes throughout the process.
For example, storing, storing digital currency into a digital currency chip card, providing a safe and secure way of storing digital currency, and transmitting the stored information in the digital currency chip card to a commercial bank and a central bank; for example, redemption refers to physical cash and digital currency. Two-way redemption process; such as payment, including online and offline, how to use digital currency chip card to pay digital currency, send payment information to commercial bank and central bank digital currency system, and give back to terminal equipment.
(2) Digital currency wallet
Keywords: signature role: digital currency wallet terminal, wallet service provider, digital currency issuance registration agency
In 2017, the research carrier has changed from the "digital currency chip card" to the "digital currency wallet", which corresponds to the difference in participating roles. Several roles that do not exist under the existing banking system have emerged, including digital currency wallet terminals, wallet service providers, and digital currency issuance registration agencies.
For example, in the logout process, the user submits a request to cancel the digital currency wallet, and the digital money wallet terminal sends the cancellation instruction to the wallet service provider, and the wallet service provider confirms that the signed cancellation instruction has legality, and then sends the cancellation instruction to the digital currency issuance registration. The organization then cancels the wallet certificate and wallet ID.
The patent mentions that the digital currency wallet function should be extended on the basis of the bank account system without changing the system of existing bank accounts. Users can directly access the digital currency wallet through the new digital currency wallet independent authentication mechanism.
(3) triggered based on… conditions…
Keywords: financial institutions
The patents applied for in 2018 have shifted from basic tools to system business. The content is based on digital currency management methods and systems triggered by loan interest rates, economic status, flow to the main body, and pilot conditions. These patents are designed for "financial institutions" in the process of digital currency circulation.
For example, if a digital currency is issued to a financial institution, the status information of the digital currency is set to an effective state when the loan interest rate and the time point condition satisfy the expected setting. In the recovery of digital currency, the economic information of the pilot is obtained, and the return rate of the digital currency is adjusted based on the economic information.
Viewpoint | National credit is the core, two-tier architecture of digital currency
Yao Qian, the director of the Institute of Digital and Monetary Research of the People's Bank of China, and Dian Gang, deputy director of the People's Bank of China, have had a lot of public statements about the blockchain. Here we focus on the main points of view on digital currency.
On November 2, 2017, Yao published a paper entitled Understanding the Central Bank's Digital Currency: A Systematic Framework. He said in the article: "The legal digital currency explored by countries is mainly to improve the efficiency of payment. But when China's electronic payment is very developed, our drawbacks are not efficiency, but need to balance efficiency and safety, promote innovation and focus on risk prevention. In order to make up for the lack of digital legal currency at the retail end, we must supervise private payment instruments, and then gradually explore the legal digital currency.” He also pointed out: “The programmability of digital currency has a lot of imagination, and exploration in this direction is also Very important, it may be the next stage of work."
Subsequently, Yao Qian introduced the two-tier framework of digital currency in the article “Digital Currency and Bank Accounts” published in the May 2017 issue of Tsinghua Financial Review. The two layers of this two-tier framework are the central bank and the commercial bank, respectively, and are based on account-based and wallet-based. He proposed the binary system of “traditional account system of commercial banks + attributes of digital currency wallets” .
Yao Qian pointed out: " In terms of specific design, we can consider introducing the digital currency wallet attribute in the traditional account system of commercial banks to realize the management of existing electronic money and digital currency under one account. Electronic money and digital currency management There are commonalities, such as account usage, identity authentication, fund transfer, etc., but there are also differences. Digital currency management should comply with the central bank's design standards for wallets, similar to the concept of safe deposit boxes."
Yao Qian said at the end of the article that the discussion of this article is only the beginning, and further investigations include:
“1. How to design differentiated money use cost and asset price policies to ensure the dynamic balance between banknotes, legal digital currency and commercial bank deposits during the transition period. 2. How to build a benign central bank on this design, ( The application ecology between the issuing bank), commercial banks, wallet service providers, payment service providers, and digital currency users."
It can be seen that the above viewpoints are also strongly consistent with the patent direction of the Central Bank Digital Money Institute.
In addition, Di Gang wrote "Digital Currency Analysis" in "China Finance" in 2018, discussed the definition and connotation of digital currency, and clarified the concepts of legal digital currency, private digital currency, electronic money, and virtual currency.
Di Gang's core point of view is that the legal digital currency originates from national credit, and payment is the main feature of the settlement, which can effectively supplement the existing electronic money system. Digital cash can use the mobile wallet as a carrier to expand the service radius, eliminate the financial gap, and realize inclusive finance.
1. Whether it is paper currency or digital currency, it is a symbolic currency compared to commodity currency, and the foundation is derived from credit. 2. The legal digital currency is a digitized renminbi cash, based on a complete national credit. If the private digital currency attempts to use technology credit as the basis, the legal digital currency is the strongest credit currency superimposed by technical credit and national credit. 3. “Payment is the settlement” is a distinctive feature of the legal digital currency, and the legal digital currency can realize point-to-point transactions with controllable anonymity. 4. The legal digital currency combines the anonymity, efficiency, cost advantage of cash point-to-point and the space-time advantage of electronic money. Its digital characteristics can customize many innovative business models for the scene, so it can be regarded as an effective supplement and upgrade of the existing electronic money system. 5. Digital cash can use the mobile wallet as a carrier to achieve loose coupling of bank accounts, and take advantage of the radius of mobile network services far greater than the service radius of bank outlets. The legal digital currency can effectively promote the process of eliminating the financial gap and achieving financial inclusion.
From this we can roughly see that the main direction of the central bank's legal digital currency research is how to introduce the legal digital currency and digital currency wallet system as a supplement based on the existing dual system of central banks and commercial banks. Patents also focus on how to build effective communication and security between the two. Of course, for the understanding of a thing, “visible” is very important, and “invisible” is more important. For blockchain practitioners, it may be more concerned with the economic model design of legal digital currency issuance. This is the current What we didn't see in the public information.
In addition, the author smells an opportunity. The legal digital currency will be based on an independent “wallet” system. From a technical point of view, this should be a completely different framework from the existing “wallet” of commercial banks. We mentioned in the patent article. Some new roles such as digital currency wallet terminal, wallet service provider, and digital currency issuance registration agency. I don’t know if the wallet industry of the blockchain industry is a potential track. Of course, this is only the author's talk, the key is to look at the next move of the central bank and the Digital Money Institute, and Babbitt will follow up on the report in real time.