Central bank official "portrait" legal digital currency

“The central bank’s digital currency can be said to be in the air.” On the 10th China Finance 40 (CF40) Yichun Forum held on the 10th, CF40 invited member and deputy director of the People’s Bank of China’s payment and settlement division, Mu Changchun, said that Since 2014, the research on the central bank's digital currency (DC/EP) has been going on for five years. "Beginning last year, the relevant personnel of the Digital Money Institute have done the relevant system development, which is already 996."

Mu Changchun revealed that the central bank does not directly issue digital currency to the public, and will adopt a two-tier operating system, that is, the People’s Bank will first convert the digital currency to a bank or other operating agency, and then convert these institutions to the public, and insist on centralization in the process. Management model. The central bank does not presuppose technical routes, does not necessarily rely on blockchains, and will fully mobilize market forces to achieve system optimization through competition. According to the "Economic Information Daily" reporter, the central bank's statutory digital currency will be piloted in some scenarios in the early stage, and will be further promoted after more mature. For the sake of sound consideration, the pilot exit mechanism will be designed.

Deep cultivation for five years

The central bank held a video conference on August 2 to make arrangements for key tasks in the second half of 2019. The meeting requested that eight key tasks be done in the second half of the year. One of the key tasks is to develop financial technology, strengthen follow-up research, and actively meet new challenges. Accelerate the pace of research and development of legal digital currency in China, track and study the development trend of virtual currency at home and abroad, and continue to strengthen Internet financial risk remediation.

It is understood that the central bank's research on legal digital currency can be traced back to five years ago, and it now has a certain amount of patent reserves. In 2017, the People's Bank of China Digital Currency Research Institute was formally established. The "Economic Information Daily" reporter learned through the Patent Enquiry System of the State Intellectual Property Office that up to now, the People's Bank of China Digital Currency Research Institute has applied for 74 patents involving digital currency.

In the context of the already developed electronic payment, what is the significance of the central bank issuing legal digital currency? Mu Changchun said that for the common people, the basic payment function is relatively vague between the electronic payment and the central bank's digital currency, but the central bank's future digital currency will be very different from electronic payment in some functions.

According to him, from a macroeconomic point of view, the transfer of funds from electronic payment instruments must be completed through traditional bank accounts, and the “account tight coupling” approach is adopted. The central bank's digital currency is “loosely coupled to the account”, which can realize the value transfer from the traditional bank account, and the transaction dependence on the account is greatly reduced. The central bank's digital currency can be easily circulated as cash, which is conducive to the circulation and internationalization of the renminbi, while at the same time achieving controllable anonymity.

The industry has been paying close attention to the technology giant's move in cryptocurrency research and development. Not long ago, Facebook plans to introduce cryptocurrency Libra, which has attracted the attention of the market and regulators. Participants said that while the commercial digital currency is gradually heating up, the future trend of digital currency development is based on national credit and the legal digital currency issued by the central bank.

Shao Fujun, chairman of China UnionPay Co., Ltd., said that the statutory digital currency of the central bank will have a great positive impact, which will improve the efficiency of monitoring currency operations and enrich monetary policy instruments. The issuance of the central bank's legal digital currency will enable the real-time collection of data such as currency creation, accounting, and movement, and after data desensitization, through in-depth analysis by means of big data and other technical means, for the formulation of money, the formulation and implementation of monetary policy. Provide useful references and provide useful tools for economic regulation. In addition, the central bank's digital currency can help in anti-money laundering and counter-terrorism financing.

Technical route will "market competition"

In the public's perception, encrypted digital currency and blockchain technology are often bundled. Relevant people of the central bank have repeatedly stated that digital currency is not the same as the blockchain, and the blockchain is only one of the underlying technologies of the central bank's digital currency alternative. At the forum on the 10th, Mu Changchun made it clear that the central bank does not presuppose technical routes in the process of promoting legal digital currency, which means that it does not necessarily depend on a certain technical route.

Mu Changchun said that the central bank's digital currency research team initially made a prototype and completely adopted the blockchain architecture. Later, it was found that the pure blockchain architecture could not achieve the high concurrency performance required by retail. He explained that Bitcoin handles 7 transactions per second, and Ethereum is 10 to 20 per second. According to the data released by Facebook, Libra is 1000 per second. "In contrast, the network was last year. The peak value of 'Double Eleven' is 92,571 pens per second."

Mu Changchun said that the central bank has never presupposed a technical route. "Any technical route is ok, not necessarily a blockchain." He said that the central bank is currently in a state of "horse racing" in the choice of technical routes and the market competition is preferred. Several designated operating agencies have adopted different technical routes for the research and development of digital currency. Whose route is good, who will eventually be accepted by the people and accepted by the market, who will eventually win the game. "Any kind of technical route, the central bank can adapt, provided that your technical route has to meet certain thresholds, such as at least to meet high concurrent demand, at least 300,000 pens / second." He said.

Zhou Xiaochuan, former president of the People's Bank of China, also wrote an article recently saying that one of the most important tasks of the central bank is to help build a competitive environment, so that the best technology can be successfully highlighted and developed, and better technology applications can be achieved through competitive selection. Competition is a dynamic process, because technology advances very quickly, so there will be a technology that has a large market share at a certain stage, but there will be another new technology coming out, forming a wave and a wave. The situation of advancement. "This is a common phenomenon in science and technology, and it is possible to create a coordinated, universal, and switchable method in the middle." Zhou Xiaochuan pointed out.

Double-layer operating system

Earlier, some insiders worried that if the central bank issued digital currency directly to the public, it might have a fundamental impact on the existing commercial banking system. Mu Changchun made it clear that the central bank's legal digital currency adopts a two-tier operating system, that is, the People's Bank of China first converts digital currency to banks or other operating agencies, and then these institutions convert them to the public. He stressed that the natural attributes of crypto assets are decentralized, but under the two-tier operating system arrangement, the central bank must adhere to a centralized management model.

Mu Changchun said that China is a complex economy with a vast territory and a large population. The economic development, resource endowment, population education and acceptance of intelligent terminals are different. Digital currency is a complex systemic project. If a single-tier operating structure is adopted, that is, the central bank directly issues digital currency to the public, which means that the central bank will face all the public alone, which will bring great challenges to the central bank. From the perspective of improving accessibility and increasing public willingness to use, a two-tier operational framework should be adopted to deal with this difficulty. He said that the People's Bank of China decided to adopt a two-tier structure, in order to give full play to the resources, talents and technological advantages of commercial organizations, promote innovation and competitive selection.

According to the "Economic Information Daily" reporter, the central bank's statutory digital currency will be piloted in some scenarios in the early stage. After more mature, it will be further promoted. From a sound perspective, the pilot exit mechanism will be designed. Zhou Xiaochuan recently wrote that the central bank's digital currency pilot should still limit the scope as much as possible and design an exit mechanism. He said that the ex ante design of the exit is like writing a "living will", how to withdraw if there is a problem? It must be designed in advance. Technology inventors and innovators may not be keen on this design, and the central bank should require it to do adequate design.

Shao Fujun said that in the dual delivery system, the digital currency issued by the agency issuance has its own logo. For example, ICBC issues the logo of ICBC, and the Agricultural Bank of China issues the logo of the Agricultural Bank. The payment clearing institution can support the number by transforming the existing network. The liquidation of the currency is cleared.

This article is from the "Economic Information Daily."