Shao Fujun, Chairman of UnionPay: Most worried about the spread of digital currency, the payment clearing institution may no longer exist

On August 10th, at the China Financial Forty Forum, Shao Fujun, Chairman of UnionPay, shared their views on digital currency research. He admits that UnionPay, as a payment clearing institution, is really concerned about the emergence of digital currency, and with the large amount of application and popularization, payment clearing institutions are still absent? What role does the payment clearing institution have in it? This is the biggest challenge for us and the issue we are most concerned about.

The following is the full text of Shao Fujun, published by Babbitt.

Digital currency is particularly hot this year, with many articles and many opinions. Around 2015, Governor Zhou Xiaochuan of the People's Bank of China opened a meeting in our 9-story conference room, proposing to study digital currency. At that time, we all were very surprised. What is the digital currency? Our UnionPay also has some research on digital currency, and we will share it with you today.

1. What is the intrinsic value of digital currency development?

This question may be very simple. The evolution of the currency pattern is a continuous process of innovation. We are all studying currency banking and reviewing the history of currency development. As a general equivalent, whether it is the original shell, precious metal, metal coin, or the emergence of the Chinese, the silver ticket, etc., the emergence and development of each currency form is based on the innovation under the historical conditions. The function of money is also further refined and enriched.

At present, we discuss the need for digital money to be based on the essence. What is the innovative value that digital technology brings to money? According to the classical theory, the means of payment, the stored value tool, and the accounting unit are the three major functions of money. How to realize these three basic functions of digital currency is a very complicated and interesting problem, which is worthy of continuous research and discussion.

Encrypted digital currencies dominated by commercial institutions, such as Bitcoin, which is very hot, did not become a popular currency because its price fluctuated and it was generally considered a digital asset or a digital commodity.

During this time, libra caused great concern. On the one hand, the digital economy monopolistic technology companies and the huge network advantages have a coordinated effect. Everyone believes that this will pose new challenges to the operation and supervision of the existing financial system, which will attract the attention of all parties. On the other hand, it is also a solution to stabilize the currency because it aims to create a super-sovereign currency and design a chain of money as a basis. It has made new attempts to strengthen the credit stability currency system, and so far there are many details that are not clear. The application scenario is still focused on cross-border payments. How is the future development and the prospects are still to be further observed.

From the perspective of national monetary theory, our future is also the biggest possibility for the development of digital currency, or the legal digital currency issued by the central bank based on national credit.

2. Positive impact and difficult challenges of legal digital currency

The legal digital currency has the following positive effects:

First, improve the efficiency of monitoring currency operations and enrich the means of monetary policy.

The current currency issuance method, because of the lack of effective real-time monitoring means for currency circulation after issuance, is basically through statistics and estimation. The central bank's digital currency issuance will make real-time collection of data such as currency creation, accounting, and movement possible. After data desensitization, it will conduct in-depth analysis through big data and other technical means to provide money for the formulation and implementation of monetary policy. Provide useful references and provide useful tools for economic regulation. At the same time, the central bank's digital currency can also effectively provide some assistance in anti-money laundering and counter-terrorism financing.

Second, it helps to improve the level of intelligence of the transaction process.

The legal digital currency is not only the digitization of money. It can also solve the problem of trust between the two parties and the synchronization of information flow and capital flow through the combination of intelligent technology and the design of intelligent contracts. This advantage can greatly simplify traditional finance. A more complex transaction process between agencies.

Third, effectively improve the efficiency of payments, especially cross-border payments, and establish an open payment environment.

From the perspective of the most basic payment function of money, by using the legal digital currency, the circulation network of legal tender can be greatly flattened, and the comprehensive interconnection of the payment system can be realized at the bottom, and the exchange of links can be greatly reduced, and cross-border improvement can be achieved. The liquidity of funds solves the problems of traditional cross-border exchanges in terms of long chain, slow arrival, low efficiency, etc. This is the advantage and role I want to talk about.

From the perspective of legal digital currency, it faces some difficulties and problems:

First, its technical implementation difficulty also has some problems. The legal digital currency has many advantages in theory, which has already been said. However, subject to the current state of the art, it is indeed difficult to achieve real-time data collection, monitoring and analysis of massive amounts of money, and it is difficult to carry out efficient and accurate programmable operations.

Second, the difficulty of international coordination is also a problem. The coordination of monetary policy and exchange rate policy among countries is a difficult problem in the current exchange rate situation. After the use of legal digital currency, coordination will be more difficult. As the regulation of payment markets in various countries, countries vary widely, and the starting points and goals of countries studying digital currency are also very different. At present, some countries support it, some are waiting to see, and some are explicitly prohibited.

Third, there are some difficulties in basic preparation. From the perspective of top-level design, the legal digital currency will have a profound and huge impact on the underlying operational logic of various financial services and financial services. Its comprehensive application base in the financial system is still seriously inadequate. There is a lack of corresponding underlying operational norms and a lack of corresponding regulatory mechanisms. For example, whether the basic issues such as whether it is anonymous, whether it is interest-bearing, etc. are still being explored.

From the perspective of commercial digital currency, there are also some problems:

These schemes of the commercial digital currency that are currently seen are fundamentally tokens, and it is difficult to truly exist as a currency. It also has some difficulties and problems.

the first. The question of trust. Stable value is a prerequisite for the acceptance and universal circulation of money. At present, the main body of the issue of commercial digital currency, if it is a business alliance, the principle and foundation of the currency is commercial trust, lack of stable and transparent operating mechanism, is there a super-issue? Is there a shortage of issues? How about the liquidity that is paid by itself? Is the reserve fund misappropriated? These are indeed in doubt and there are risks.

Second, the risk of technical control. Blockchain technology, in addition to bottlenecks in high-frequency transaction processing and rapid response effectiveness, commercial digital currency involves hundreds of millions of customer information, involving customer privacy disclosures and security information. At the same time, the anonymity of commercial currency poses a challenge to anti-money laundering anti-terrorism financing regulation.

Third, the risk of integration of industry and finance and monopoly. The development of large-scale technology platform has continuously expanded its business scope. While improving efficiency, it has also led to the emergence of new integration of industry and finance and monopoly.

Fourth, the risk of monetary policy and foreign exchange management. After the emergence of commercial digital currency, once its transnational operations affect the liquidity of national legal currency, affecting the currency sovereignty of non-reserve currency countries, it may also lead to the loss of funds from weak countries, anti-money laundering measures, etc., monetary policy failure, monetary policy The impact and risks brought about by the currency operating system are also great.

3. The role of payment clearing institutions in the issuance of digital currencies

As a payment clearing institution, UnionPay really cares about the emergence of digital currency after the emergence of digital currency. Is the payment clearing institution still absent? What role does the payment clearing institution have in it? To be honest, this is the biggest challenge for us and the issue we are most concerned about.

From a commercial digital currency perspective , in the case of libra, after an organization or user registers, it assigns a globally encrypted user account, an account. Peer-to-peer transactions are achieved by using libra code for different local currency transfers.

This transaction process, using distributed accounting, has libra system verifiers, stores and updates the books, optimizes the transaction process, and simplifies the reconciliation, but the whole transaction is a subversive change to the transfer clearing institution. We do not see commercial banks at present. I can't see the account of a commercial bank. I don't see the role of the transfer clearing institution in it, or it may be gone.

From the perspective of legal digital currency , is it also necessary to consider this issue and how to interface with the existing electronic payment system? At present, according to my understanding, the plan proposed by the People's Bank of China Digital Currency Research Institute or other relevant institutions, the central bank proposed to the top-level design of the central bank, to build a dual system of the People's Bank of China, commercial banks, this system is slightly better. The central bank is responsible for overseeing the entire system and developing a policy for the issuance and circulation of digital currencies. To ensure system security, robustness and risk controllability, there are central bank authorizations, and several agency issuers, such as commercial banks and central banks, build a real-time computing system based on the blockchain, and obtain the reserves through commercial banks to deposit reserves with the central bank. The right to issue money, thus bringing digital currency to market.

There are two possible situations. First, under the two-tier system of central bank and commercial bank, the blockchain covers the whole process of issuance and circulation of digital currency, that is to say, the blockchain in the dual system will register the issue information and circulation information of the blockchain to the end user. The digital currency transaction is a peer-to-peer transaction process. After the end user issues a digital currency transaction request, the transaction verification and transaction records are directly performed by the node related to the blockchain network in the blockchain. The blockchain network protocol is completed directly. In this case, the payment clearing institution pays aside, and in this case, the transfer payment institution is also marginalized.

In addition, in the dual delivery system, the agency issuance agency, which issues digital currency has its own logo, ICBC issues the logo of ICBC, ABC has the logo of the Agricultural Bank, and the payment clearing institution makes a transformation of the existing network to support the digital currency. After the liquidation and liquidation, the central bank pays the reserves to obtain the circulation of the digital currency, and the issued digital currency becomes the liability of the agency, and each agency issuing institution needs to have an identifier for these digital currencies. It is equivalent to issuing Hong Kong dollars, and Bank of China has corresponding signs, and monitors the circulation of digital currency.

This situation is slightly better, similar to the existing bank account system, with an additional digital currency account. In the dual delivery system, it is necessary to establish a blockchain network that connects the digital currency payment of each bank. At this time, the digital currency account has an inter-bank transaction, and the payment clearing institution can record the settlement amount of the issuer's end user. The transfer clearing agency can play a role in finding the role inside.

Our country has established a large-scale, super online banking and other covering the settlement and clearing system of funds outside the country, and the development of mobile networks is also very fast. From our perspective, we suggest that the construction of digital currency should attach great importance to the role of existing payment clearing institutions.