The Beijing News: The central bank’s digital renminbi is coming out, and the Bitcoin Librae currency is going to be cool?

The digital currency launched by the People's Bank of China is based on new Internet technologies and introduces a new encrypted electronic money system, which is undoubtedly a major change in the monetary system.

The Chinese central bank’s digital currency, which has been studied for five years, is “out of the box”. On August 10, Mu Changchun, deputy director of the Payment and Settlement Department of the People's Bank of China, said at the China Financial Forty Forum that the central bank's digital currency is about to be launched and will adopt a two-tier operating system.

Personal and corporate digital currency projects were once mainstream

With the development of Internet technology and big data, many so-called "digital currencies" have emerged around the world. Now that the central bank’s digital currency is on the horizon, many non-sovereign “digital currencies” will also be dwarfed.

As of now, no central bank has launched a sovereign “digital currency”. For this reason, the IT tech wizards who “swords are slanting” make full use of financial technology innovation and “blockchain” technology, and the so-called “digital currency” bitcoin was created ten years ago.

But from the perspective of currency attributes, Bitcoin is not money in nature. Technically speaking, Bitcoin does have some advanced features. For example, it uses blockchain technology, multilateral accounting, real-time query, software open source, and P2P. It does not rely on a specific currency institution to issue, according to a specific algorithm. A lot of calculations are produced. Bitcoin uses a distributed database of nodes in the entire P2P network to identify and record all trading behaviors, and uses cryptographic design to ensure the security of all aspects of currency circulation. Point-to-point transmission means a decentralized payment system.

Since its birth ten years ago, Bitcoin has been defined as a “derivative product”. It has been affected by factors such as different regulatory standards, ransomware for ransomware, cross-border money laundering and speculative speculation. It has risen by over US$20,000. However, its speculative nature is affected by regulatory tightening and technical problems, resulting in high prices.

Affected by the demonstration effect of Bitcoin, many kinds of bitcoins have emerged. The so-called "digital currency" of non-sovereignty has a global total of more than 100 kinds, which has interfered with the international monetary and financial system to some extent. Under the temptation of a huge “coin tax”, more companies and individuals are eager to try. Even the famous American listed company Facebook has released the digital currency Libra project, which has led to the rise of many global blockchain concept companies.

It is worth noting that not all individuals and businesses can issue digital currency. From the nature of money, only the state can exercise the highest power to issue money, and this is an exclusive power. Therefore, no matter how advanced the technology, it cannot exceed the national currency distribution rights.

The central bank pushes digital currency with breakthrough significance

In the era of financial technology big data, for sovereign countries, the best way to implement the distribution rights of monetary countries is to issue sovereign digital currencies under the control of the government and the central bank. The introduction of digital currency by China's central bank has an important breakthrough significance.

The digital currency introduced by China's central bank does not refer to the digitization of the currency under the existing monetary system. Instead, it is based on new Internet technologies, especially blockchain technology, and the introduction of a new encrypted electronic money system, which is undoubtedly a major currency system. change.

According to reports, China's central bank digital currency will adopt 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 are redeemed to the public. In this process, the central bank will adhere to a centralized management model: the central bank does not presuppose the technical route, does not necessarily rely on the blockchain, and will fully mobilize market forces to achieve system optimization through competition.

In fact, the central bank's digital currency is very different from electronic payment in some functions. In the past, the transfer of funds from electronic payment instruments had to be completed through traditional bank accounts, and the “account tight coupling” approach was 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.

It is foreseeable that the digital renminbi era is coming, and the digital renminbi is based on national credit and the legal digital currency issued by the central bank, which will have a great positive impact.

For commercial banks and other financial institutions, it is both an opportunity and a challenge. In the future, more digital credit, digital assets and digital liabilities will be derived based on digital currency, and non-sovereign “digital rights currency” will gradually cool down. . In addition, after the issuance of the central bank's digital currency, it can improve the efficiency of monitoring the operation of the currency and enrich the monetary policy.

The issuance of the central bank's legal digital currency will enable real-time data collection 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. At the same time, the central bank's digital currency can also help in anti-money laundering and counter-terrorism financing.

In short, the introduction of digital currency by the People's Bank of China is a major monetary system change both domestically and internationally.

Source: Beijing News , August 14th, 2019, A04 version

Author: Sun Zhaodong (economists, financial technology Big Data Research and Training Institute CCB University senior economist)