How to accelerate the development of digital currency in the second half of the year, eight former and current central bank officials have outlined

At the beginning of August, the central bank held a video conference for the second half of 2019. The meeting called for speeding up the pace of research and development of legal digital currency in China. At the same time, some media inquired about the patent enquiry system of the State Intellectual Property Office. Statistics As of August 4, 2019, the Central Bank Digital Money Research Institute applied for 74 patents involving digital currency.

China's central bank digital currency is constantly advancing, and its research and development framework is gradually revealed.

The inter-chain pulse is based on the speeches and writings of the central bank’s former governor Zhou Xiaochuan, the deputy governor of the central bank, Fan Yifei, the former director of the central bank’s digital currency research institute, Yao Qian, the central bank’s research bureau and the director of the Money and Banking Bureau, Wang Xin. For the idea of ​​digital currency, outline the outline of the Chinese central bank's digital currency.

(Organization: Mutual Chain Pulse) What is the central bank digital currency? At present, countries have not yet reached a unified consensus on the definition of central bank digital currency.

However, Yao Qian, former director of the China Central Bank's Digital Currency Institute and the general manager of China Securities, had discussed the article “Previous and Present Life of Digital Money” published earlier this year.

In the article Yao’s premise, in 2018, a report by the Bank for International Settlements (BIS) gave a more interesting definition, which uses the exclusion method to define: it summarizes the various types of payment instruments that exist, and then determines Which are not the central bank digital currency, after the exclusion, the rest is the central bank digital currency.

After the exclusion, BIS believes that there are two possibilities. One possible central bank digital currency is that the central bank's account is open to the public, allowing the public to open an account at the central bank like a commercial bank. The central bank has developed a super Alipay. For all C-side customer service. BIS believes that the central bank currency thus formed is the central bank's digital currency, which is called the central bank digital currency (CBDA) based on the account.

Another possible central bank digital currency is the token issued by the central bank in the form of Bitcoin. It can be called the Token-based Central Bank Digital Currency (CBCC) , which can be either wholesale or wholesale. retail.

Yao Qian said that the account-based account is still based on tokens, representing two different technical routes, and which ideas will dominate the future, remains to be seen.
The above is the definition of the international central bank digital currency mentioned by Yao. In China, the central bank digital currency is defined as M0, which is a partial replacement of cash. And its specific connotation should be understood from its main body, delivery mode, regulatory form, influence and so on.

Subject and scene: mostly used for retail, micropayment is an alternative to M0

Summarizing the relevant data of the central bank's digital currency, China's central bank digital currency allows commercial banks, non-bank financial institutions, households and companies to visit. The applicable areas are retail and micropayments, which are for M0 instead of M1 and M2. substitute.

In particular, regarding the issue of M0 or M1 and M2, several relevant leaders of the central bank have repeatedly pointed out in articles and speeches. Here we introduce the concept, M0 is cash in circulation; M1 is M0 + corporate demand deposit; M2 is M1 + quasi-currency (time deposit + resident savings deposit + other deposits). If you simply describe it, M0 is equivalent to the cash in hand, M1 is the cash and the bank's demand deposit, and M2 is the first two plus the time deposit and other forms of purchasing power.

Mutual chain pulse observation, the earliest discussion of this point is the deputy governor of the central bank Fan Yifei. In January 2018, Fan Yifei published the signed article "Some Considerations on the Digital Currency of the Central Bank". The article stated that China's current central bank digital currency design should focus on M0 substitution instead of M1 and M2 substitution.

On the one hand, M1 and M2 are based on commercial bank accounts, have been electronically or digitized, and are not necessarily digitized again with digital currency; the need to digitize existing banknotes and coins is increasing. On the other hand, non-cash payment instruments are based on the tightly coupled account model and cannot fully meet the public demand for easy-to-use and anonymous payment services. It is impossible to completely replace M0.

Two months after Fan Yifei’s publication, Yao Qian, former director of the Central Bank’s Digital Money Institute, published an article entitled “Technical Considerations of the Central Bank’s Digital Currency”, which further explained the concept of Fan Yifei’s previous “Considerations on the Central Bank’s Digital Currency”. It is also pointed out that at this stage, the primary starting point for China's research and development of the central bank's digital currency is to supplement and replace the traditional physical currency, which is defined as the cash (M0) category.

Later, in July 2018, Wang Xin, director of the Central Bank Research Bureau and Monetary and Financial Bureau, said in a speech that in China, it may be more reasonable to use CBDC for retail payment. Wang Xin said that the central bank's digital currency replaces physical cash, mainly because the central bank's digital currency is mostly used for retail and micropayments, and it is a substitute for M0 instead of M1 and M2. But it is not that physical cash will soon disappear.

Therefore, the substitution of the central bank's digital currency against M0 is a partial replacement of cash. Therefore, the central bank's digital currency involves a wide range of subjects, and the main application scenario is the retail scene.

Delivery mode: two-tier delivery system via commercial banks

After the target and the scene are clear, how will the central bank's digital currency reach its target, which is the problem that comes with it. That is to say, the central bank's digital currency distribution model, mutual chain pulse observation, for this point, the views of the relevant leaders of the central bank are basically the same.

The first is the model aspect of the two-tier delivery system.

The same is the article of the central bank's deputy governor Fan Yifei, "Some considerations about the central bank's digital currency", which first pointed out that the Chinese central bank's digital currency should adopt a two-tiered delivery system (the "two-tier delivery model of the central bank-agent-sponsored commercial organization") . The central bank and commercial banks can work closely together, do not presuppose technical routes, fully mobilize market forces, and achieve system optimization, joint development, and joint operation through competition.

Yao Qian also mentioned in his article that whether it is the traditional “central bank-commercial bank” dual model or the two-tiered system, the central bank’s digital currency must be selected for the existing monetary system and business structure. And the way the infrastructure impact is minimal.

Just last month, Zhou Xiaochuan, the bank's former president, said at a seminar that China could entrust commercial entities to issue digital currencies. It is also a concept similar to the "two-tier delivery system." The second is the main aspect of the two-tiered delivery model.

The main body of the two-tiered delivery model mentioned by Fan Yifei in his article is a commercial bank; Zhou Xiaochuan proposed a commercial entity. He said at the meeting that Hong Kong's monetary system allows "commercial entities" to issue banknotes backed by their private assets, and China can gain experience from it. It is reported that Bank of China (Hong Kong), HSBC and Standard Chartered Bank are Hong Kong's money-issuing institutions and support them through the US dollar reserves. Zhou Xiaochuan said that by following this currency-linked model, China can avoid the "huge fluctuations" that plagued the initial development of cryptocurrency.

Although Zhou Xiaochuan did not elaborate on what kind of "commercial entity" might be suitable for issuing digital currency in China. However, according to the examples of HSBC and Standard Chartered Bank, it seems that, like Fan Yifei, the main body of the central bank's digital currency can be a commercial bank.

Form of supervision: front desk voluntary background real name

In terms of regulation, the first thing that can be made clear is that in order to achieve monetary policy and macro-prudential management objectives, China's central bank digital currency is different from the decentralized distribution model of various tokens.

At the recent press conference on financial statistics in the first half of 2019 held in July, Zhou Xuedong, the director of the central bank's office, said when talking about Libra, whether it is legal tender or virtual currency in recent years, there is a consensus. That is, it must be subject to supervision, such as supervision of anti-money laundering, anti-terrorism financing, and information protection.

Fan Yifei also mentioned in the previous article "Some Considerations on the Digital Currency of the Central Bank" that it should ensure the central position of the central bank in the process of launching; ensure and strengthen the macro-prudential and monetary policy control functions of the central bank ; realize the central bank's contribution to digital currency Tracking and supervision . China's central bank digital currency should be released in a loosely coupled manner, and adhere to a centralized management model: to ensure the central position of the central bank in the delivery process; to achieve controllable anonymity, only to disclose the transaction data to the central bank.

Yao Qian further interprets and points out the realization of the loose coupling between digital currency and bank accounts: consider introducing the digital currency wallet attribute in the traditional account system of commercial banks to realize the management of existing electronic money and management of numbers under one account. currency

In the aspect of central bank digital currency supervision, the use of digital currency "front-end voluntary, back-end real-name" characteristics, through the security and privacy protection technology to manage the use of relevant data, to achieve traceability under certain conditions, to ensure that big data analysis and other regulatory technologies are useful Ground.

The impact of central bank digital currency on payment and monetary policy

This year, more and more scholars and related parties will discuss the impact of the continuous advancement of China's central bank digital currency. In the two articles published by Yao in the March issue of "The Impact of Statutory Digital Currency on Monetary Policy and Financial Stability" and "Central Bank Digital Currency: Optimization of the Monetary System and Its Distribution Design", Wang Xin at the July Symposium There are related statements. Mutual chain pulse organizes their proposed effects into the following aspects:

First, optimize the payment system

Yao Qian pointed out that in terms of payment, the central bank's digital currency has created a new model for interbank payment settlement. After the introduction of the central bank's digital currency, the central bank does not need to adhere to the traditional model, that is, the private sector provides payment services and the central bank provides value guarantees. Based on the central bank's digital currency, payments do not rely on third-party services, thereby expanding the existing fiat money payment network. The central bank's digital currency has overcome the shortcomings of banknotes: by collecting management fees, it can achieve the negative interest rate target of unconventional monetary policy; based on traceability, it can carry out anti-money laundering, anti-tax evasion, etc.; the cost of issuance, trading, and storage is greatly reduced.

In his article "Digital Currency Analysis", Di Gang, deputy director of the Central Bank's Institute of Digital Money, mentioned that "payment is settled" is a prominent feature of legal digital currency. The legal digital currency can realize controlled and anonymous peer-to-peer transactions. Cash is efficient, convenient, and the advantages of both payment and instant payment. The information flow and capital flow are natural, and there is no need for background clearing, settlement and reconciliation. The cryptographic signature conversion can realize the point-to-point value transfer and privacy protection.

Second, improve the effectiveness of monetary policy

Wang Xin mentioned that the digitization of the central bank's currency will help optimize the central bank's monetary payment function and increase the central bank's monetary status and monetary policy effectiveness. The central bank's digital currency can become an interest-bearing asset, satisfying the holder's reserve demand for safe assets, and can also become the lower limit of bank deposit interest rates, and can also become a new monetary policy tool.

Yao Qian also pointed out that based on rational mechanism design, the central bank's digital currency is not only "neutral" to monetary policy and macroeconomics, but also a new monetary policy tool. The central bank's digital currency has four characteristics: time dependence, departmental dependence, loan interest rate dependence and economic status. Therefore, the central bank can reduce the time lag of monetary policy transmission, prevent the currency circulation from outside the real economy, increase the effectiveness and timeliness of the impact of the benchmark interest rate on the loan interest rate, and carry out countercyclical regulation.

Third, maintain financial stability

Yao Qian pointed out in the article "Central Bank Digital Currency: Optimization of the Monetary System and Its Issuance Design" that the central bank's digital currency can avoid "narrow banks" by increasing the friction and cost of bank deposits to the central bank's digital currency in terms of financial stability. influences.

The development of central bank digital currency

After understanding the framework of the central bank's digital currency, and reviewing its development process, it will find that China's central bank digital currency is advancing at a pace suitable for its development stage. Since 2014, the People's Bank of China has started research and development on digital currency and central bank digital currency under the auspices of then Governor Zhou Xiaochuan. So far, there have been five years of development. At present, the Central Bank Digital Money Research Institute has applied for 74 patents involving digital currency.

In the future, the central bank's digital currency will be presented in a form that is worth looking forward to. Mutual chain pulse, remember, Yao Qian once pointed out in his article, "How to achieve the overall economic benefits and the maximization of social welfare is the core proposition of legal digital currency research and development. "

(Table: Inter-Chain Pulse Institute)

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