On August 18th, the CPC Central Committee and the State Council issued the "Opinions on Supporting Shenzhen's Pioneering Demonstration Zone with Chinese Characteristics", which mentioned that it supports Shenzhen's innovative exploration of digital currency research and mobile payment.
A week ago, Mu Changchun, deputy director of the Payment and Settlement Department of the People's Bank of China, claimed that the central bank digital currency (hereinafter referred to as CBDC) had been developed for five years at the third China Finance Forum.
A big move is being laid out. The introduction of digital currency by the domestic central bank is conducive to accelerating the internationalization of the renminbi, enabling China's CBDC to become a pricing standard for digital assets, contributing to the rebalancing of the international monetary system and the promotion of world economic development.
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First, the demand is not strong, CBDC sword refers to the pricing power of digital assets
In the digital economy era, more and more traditional assets will be transformed into digital assets. The biggest significance of the central bank's promotion of digital currency is that CBDC has the potential to become the pricing standard for digital assets in the future, making the RMB a pricing standard for digital assets rather than the US dollar.
Recently, the US government approved some stable coins, legally anchored the stable currency with the US dollar 1:1, and opened up a bridge between the US dollar and the digital currency.
By stabilizing the currency, the United States has tied the global digital currency to the US dollar chariot, and the international currency status and influence of the US dollar has been consolidated.
Domestic digital currency has always been a strong regulatory trend, and it has been continually voiced recently, which is not consistent with the low-key and cautious style of the past.
Moreover, the domestic currency issuance system is relatively complete, and the demand for digital legal currency is not strong. In addition, domestic mobile payment is very developed, Alipay, WeChat payment, Huawei, network, etc. are doing payment.
Zhu Youping, deputy director of the China Information Network Management Center, told Zinc Link that the central bank is in a hurry to issue CBDC, which is mainly affected by the international situation. The fundamental reason is to accelerate the internationalization of the RMB. China cannot lose the development opportunities in the digital currency field.
Zhu Youping analyzed: "The United States has realized that instead of suppressing bitcoin, it is better to bind the US dollar and cryptocurrency with stable currency. Bitcoin can't replace the US dollar, but it consolidates the international currency status of the US dollar."
Regarding the pricing rights of digital assets, Liu Xiaolei, a professor of finance at Peking University's Guanghua School of Management, told Zinc Link that if a part of assets are digitized on the platform, it depends entirely on the value of the underlying assets. If it is a token on the blockchain, it should be valued by currency. The price of money, such as the legal currency issued by the state, is priced through the circulation of money and the speed of circulation. The price difference between different digital assets is very large.
For example, commodities like oil are currently priced in dollars. The immature digital assets are now priced with bitcoin or a stable dollar linked to the US dollar.
In the future, if digital assets become a large part of assets, then a set of pricing standards is needed.
Second, CBDC, Libra, Bitcoin contest
Compared to Libra and other digital currencies, CBDC is competitive in competing for digital asset pricing power.
In terms of credit, the core difference between central bank digital currency and bitcoin and other virtual currencies is that virtual currency is decentralized, while central bank digital currency is centralized.
A centralized digital currency, like the renminbi, is an endorsement of national credit. Bitcoin does not have any underlying support, and the valuation comes from the user's "belief".
The advantage of the CBDC is that the central bank can better manage the creation and supply of money, making the monetary policy transmission mechanism more effective; the payment and clearing system based on blockchain technology is more cost-effective.
Decentralized virtual currency represented by bitcoin also has many advantages.
The central bank Wen Xinxiang and Zhang Wei once wrote that the advantages of virtual currency are:
First, blockchain, encryption and other technologies solve the problem of security and trust of virtual currency. The two parties can complete the transaction without mutual trust.
Second, bitcoin has broken the real world currency exchange restrictions and the oligopoly of payment to a certain extent, meeting the needs of the public for low-cost cross-border payments and transactions.
Third, Bitcoin is not issued by any single institution. It is produced by “miners mining”. The speed and scale of issuance is preset by technical rules and has an upper limit, which eliminates users' concerns about currency spamming.
Fourth, the anonymity of Bitcoin also caters to the needs of some people in the information age for personal privacy protection.
However, there are still many risks in virtual currency. One is the lack of transparency. The second is the lack of legal recognition and supervision. The losses suffered by fraud, theft, and bankruptcy also lack compensation mechanisms. Third, there are technical security problems. Fourth, problem solving. The cost can be high.
Similarly, Libra faces great moral hazard.
Liu Xiaolei told Zinc Link that although Libra is bidding on a basket of currencies and guaranteeing a stable currency exchange of 1:1, it is not endorsed by national credit, but a private company. No one can guarantee 100% not overshoot. Like the USDT, there are a lot of problems, and the public is questioning the super-issue.
In terms of launch speed, according to China Daily’s report on the 20th, experts predict that if all goes well, the digital currency supported by the Chinese government may be earlier than Libra’s official release date. But what happens will be judged by facts.
Third, mobile payment has a more "central bank player"
According to Mu Changchun's introduction, China's CBDC is mainly used to replace M0, which is cash.
Zhu Youping told the zinc link that in the case of the total amount of M0, M0 is either partially issued by CBDC, part is issued by banknotes, or all is issued by CBDC.
If CBDC is just a substitute for banknotes and coins, it has little impact on monetary policy and commercial banks.
In traditional currency issuance, cash in circulation is actually a direct liability of the central bank to the public. The central bank issues cash through commercial banks due to technical constraints and cost considerations.
The central bank Wen Xinxiang believes that the central bank's CBDC circulation still passes through the central bank and financial institutions to enterprises and individuals. It is exactly the same as the banknotes in the currency creation channels, circulation links and functions, and does not deviate from the scope of traditional monetary policy regulation.
However, CBDC will join the payment field, which will have a big impact on third-party payment institutions.
Now, consumers can use WeChat and Alipay to make electronic payments. In the future, they can also use the central bank CBDC to pay. Mobile payment has a “central bank player” and a strong competitor. In the future, it will be unknown whether the government will introduce policies to regulate third-party payment institutions.
There will also be a big impact on the payment and clearing institution. For details, please see the previous report of the Zinc Link, “The Central Bank’s Digital Monetary Force under the Lincheng City, Paying the Liquidation and the “Down”.
The impact of CBDC on the real estate industry is through the banking, securities, insurance, investment and other financial institutions to serve the physical industry, saving costs, improving efficiency, and indirectly.
In the short term, CBDC can promote the development of blockchain trading platforms, especially cross-border trade and cross-border trade finance.
At present, the cross-border trade blockchain trading platform under construction, the real fund payment is completed outside the chain, and only the payment information is recorded in the blockchain.
With CBDC, real capital flow and information flow can be achieved.
Liu Xiaolei said that the Zinc Link, in particular, can be equipped with smart contracts on the blockchain, which can solve the problem of Counterparty risk. For example, the ocean bill of lading and the digital currency as the document of property rights can be converted at the same time. Similar to the "one-handed payment, one-hand delivery", there is no problem of the counterparty's repayment, and there is no need to examine the credit of the counterparty.
Second, CBDC will be safer, more efficient, and more convenient for cross-border payments. Taking global tourism as an example, He Yingqi, the general manager of the first travel blockchain chain, said that after the launch of China's CBDC, tourists no longer need to take travel passports, go to the bank to queue for foreign exchange cash, a mobile phone can travel the world, and the travel experience is greatly improved. .
In the field of digital copyright ecology, Xuan Hongquan, deputy secretary general of the Capital Copyright Industry Alliance, told Zinc Link that when value flows, users don't care if it is the central bank's digital currency, electronic money or private digital currency. Because from the perspective of asset trading, as long as it can prove that the payment is completed, it can be used to transfer and authorize assets.
Supply chain finance was once thought to have a big impact, but according to interviews with zinc links, this is not the case. Zou Jun, CEO of Guangdian Express Blockchain Technology, and Chen Haifeng, Executive Dean of the Bulk Chain Technology Research Institute of Guangzhou, agreed that because it is a substitute for M0, CBDC will not have an impact on supply chain finance in the short term.
Fourth, CBDC faces challenges: may be marginalized
Overall, CBDC is good for the blockchain industry. Central banks issued CBDC, representing the official recognition of encrypted digital currency and blockchain technology.
Zhu Youping told Zinc Link that in the future, if it can effectively regulate encrypted digital currency, CBDC can be exchanged with private digital currency.
However, in the digital economy era, digital assets will also bring new challenges to CBDC.
Xuan Hongquan, deputy secretary general of the Capital Copyright Industry Alliance, told Zinc Link that in the digital economy era, digital assets may exist in parallel with digital legal coins and flow in different application scenarios.
In the digital asset trading market, the equivalent exchange between digital assets will naturally occur, and it is not necessary to use the currency for settlement. When a digital asset can be accepted by a large group of users in the world, the central bank's digital currency is facing the possibility of being marginalized, which will be the biggest challenge facing the central bank's digital currency in the future.
Given the current immature development of digital assets, the pricing power of the renminbi or the US dollar, or the US dollar-denominated currency (Libra), is less urgent.
However, the introduction, trial operation and improvement of digital currency will take time.
Liu Xiaolei revealed that China's digital currency design plan adopts a two-tier operation system, which is not completed by the central bank itself. The cooperation between commercial banks and central banks is particularly important. These need to be piloted and run for a long time and trial run, in order to continue to improve.
Zhu Youping predicted that the future global monetary system will form a multi-currency system, which is the trend. The legal currency has the function of a legal currency, and the currency introduced by the private sector has the function of a private currency, forming a new balance of contending for one hundred dollars.
Therefore, although the dispute over the pricing power of digital assets has not yet arrived, China should plan ahead and launch the pilot of RMB digital currency as soon as possible.
Source: WeChat public number zinc link (ID: xinlianjie-)
Author: Zhao Xuejiao