Heavy! Yao Qian’s speech: Digital Assets and Digital Finance

In 2019, it was the tenth year of the birth of the blockchain. In the past ten years, the blockchain has only been able to implement Bitcoin transfer payments from the beginning, and can be developed to integrate with smart contracts, develop third-party blockchain applications, and nowadays cross-chain, sidechain, sub-chain and other technologies. Flourish. How will blockchain technology develop in the next decade?

On September 17, the 5th Global Summit of Blockchain, hosted by Wanxiang Blockchain Lab, was officially opened in Shanghai.

This year's special guests include Vice Chairman and Executive Director of Wanxiang Holdings, Xiaofeng, the founder of Wanxiang Blockchain Lab, former President of Bank of China, and Chairman of the China Internet Finance Association Blockchain Research Working Group Li Lihui, China Securities Yao Qian, deputy secretary of the party committee of the registration and settlement company, and the banknote letter of the Bank of Japan's Payment and Settlement System Bureau, Ma Zhitao, deputy governor and chief information officer of Weizhong Bank.

In the keynote speech of the morning session , Yao Qian, deputy secretary of the Party Committee and general manager of China Securities Depository and Clearing Corporation, delivered a speech entitled “Digital Assets and Digital Finance”.


The wonderful views are as follows:

1. The digitization of assets will lead to the financial retail revolution, which will bring more profound financial changes. 2. We need to turn digital resources into value resources and ultimately serve the real economy, which is also the key to digital assetization. 3. Any financial instrument, such as currency, securities, etc., is a "one-dimensional yarn" on the underlying assets. 4. Digital assets call for digital currency! In this regard, both the private sector and the public sector are working. 5. Digital assets and digital currencies are two of the most important aspects of the digital economy.

The full text of the speech is as follows (confirmed by Yao before):

The topic of my speech today is “Digital Assets and Digital Finance.” Personally, digital assets and digital currencies are the two most important aspects of the digital economy. The development of digital assets can not only effectively expand the application scenarios of digital currency, but also lay an important cornerstone for the issuance of digital currency in the future. The coordinated development of the two is the basic driving force and important symbol of the development of digital economy.

When it comes to the digital economy, it is impossible to mention the important instructions of General Secretary Xi Jinping. He pointed out that China attaches great importance to innovation-driven development, firmly implements new development concepts, accelerates digital industrialization and industrial digitalization, and strives to promote high-quality development and create high-quality life. The digital economy has become a key kinetic energy for China's economic and social development. General Secretary Xi’s speech is high-rise and rich in connotation. If the digital economy is the body, digital finance is the blood, and digital assets are the core. Digital financial innovation characterized by asset digitization is a brand new system that will transform traditional financial operations, service models and the entire ecology.

It seems that the name of "Internet finance" is not so good now. The new image of financial technology is "Internet +", "AI+", "Mobile +"… The new concepts include direct banking, online banking, open banking, smart investment, etc. In essence, if you look at these innovative financial businesses in a higher dimension, you can see that they still have not got rid of the nest of traditional financial services. The design concept and product form of “Internet+” focus on the widening of channels to bring long-tail customers, enhanced data analysis capabilities to carry out precise marketing, or combined with specific industrial policies for targeted services, and support for regulation. …but these are the levels of "skills", far from the height of the "dao".

What is digital finance, or where is new finance? I believe that digital assets are the core proposition of digital finance. Only when digital assets are alive can digital finance be fully lived, so asset digitization is the foundation of digital finance. Through digitization, asset attributes have become diversified: they can be securities or currencies, they can be stocks or futures… These names are the “amulets” that assets can circulate in traditional financial business, only in these attributes. Under the definition of assets, assets can flow; and in the new financial model of digital assets, the boundaries are blurred.

Because the digitization of assets has opened up the “rule of the governor” in the financial market, any asset has become a form in the form of severability and liquidity, which can be standardized without relying on traditional external forces to activate and Empowerment (people are famous for their "point stone into gold"). After breaking the reliance on labels such as currency, securities, and futures, the flow of digital assets will become more agile and autonomous. Recently, the US Securities and Exchange Commission (SEC) approved a number of projects such as BlockStack, so that everyone can see this: Without the participation of financial intermediaries in the traditional sense, financing activities can still be carried out, and the digitization of assets can make financing costs lower. It can be wider and the efficiency can be higher… This opens up a new situation in the financial system. Financial innovation with digital assets as its core will be an important development direction of digital finance.

First, multiple assets, integration and innovation

There is a famous saying in economics: money is a veil of physical economy. Applying this sentence, we can say that any financial instrument, such as currency, securities, etc., is a veil on the underlying assets. Take securities as an example, it is itself a symbolic representation created by artificially flowing the underlying assets.

Stocks are the securitization of shareholders' equity, bonds are the securitization of creditor's rights, electronic gold is the securitization of gold, and mortgage-backed securities (MBS) are the securitization of bank credit… The significance of securities is to create a flow for assets. Sex, but with the digitization of assets, the meaning of traditional securities may change. Because the assets are digital, there is natural liquidity, there is no need for the layer of securities, and there is no so-called securities attribute identification, and the corresponding regulatory system will be dissolved.

The ICO is highly controversial. In addition to being used as a fraud tool, it is the public offering, circulation and trading of digital equities. It is different from traditional stock concepts and models, making traditional securities concepts and foundations based on them. The entire financial system and regulatory rules have been ambiguous.

In the face of new types of unconventional digital assets, the reaction of national regulators now denies its emergence, or like the SEC, trying to re-enter the veil of securities back to new digital assets. In a public statement in November 2018, the SEC introduced an interesting name called Digital Asset Security. In a sense, Security seems to be redundant, and the SEC's intention to add Security behind Digital Asset is more to express its policy stance.

The difference between digital assets and securities can be illustrated by a simple example. Nowadays, the general electronic bill, many people define it as a digital asset, but it is not. Fundamentally, traditional electronic bills are just a form of digital representation of paper bills. They cannot be called digital assets. They should be called securities.

Because it records only part of the information as a distribution tool, and does not record information about the underlying real trading background, such as contract, logistics, invoices, taxation, and factoring. The true digital assets should be native, full-informed, digitally represented and streamed assets. Digitized orders, logistics documents, invoices, factoring contracts and other assets are the real digital assets.

These digital assets, like securities, are tradable and tradable, but they are difficult to classify as a security under the traditional division of securities. Just as the emergence of digital currency blurs the monetary levels of M0, M1, M2, etc., digital assets obscure the securities attributes. In other words, their attributes are richer in content. They can be registered as tradable products in the interbank market, or they can be registered as tradable securities products in the securities market, and can even be used as payment instruments on the basis of clarifying legal relationships. Such digital asset attributes are vague and diverse. On the other hand, this is precisely what it is special: it can be used as a security or a quasi-money… The various attributes are deeply integrated and benefit from innovation.

Second, the asset digitization, technology-driven

The digitization of assets is inseparable from the use of financial technology. Turing Award winner, the father of Pascal, Nicklaus Wirth, has proposed a famous formula: "program = algorithm + data structure". This formula profoundly reveals the essential characteristics of the program. If it is extended to a wider range of business processes, the formula can be completely modified to "financial technology = algorithm + data." It is often said that regulatory technology, big data credit, smart investment, digital currency, etc. are essentially the embodiment of "algorithm + data" after the breakthrough of singularity, but the focus is different. Therefore, some people admire the algorithm, think that the construction of the algorithm to imitate, transcend and eventually replace human beings, is the most important ability of the 21st century, and the future belongs to the algorithm and its creators.

The digitization of assets is a model for the comprehensive application of algorithms and data. The guarantee of the trustworthiness of native data through technical means is the fundamental requirement of digitalization of assets. The circulation of digital assets also needs the support of various technologies to ensure its safety, efficiency, coordination and Control and so on.

The traditional financial business is carried out around the account of commercial banks. In the digital financial era, the public and private key system upgraded the account system of commercial banks. This is a very significant change in the history of finance. It is equivalent to the traditional financial system. Created a whole new field, supporting it to run safely is a complex set of trusted technology and cryptography solutions. The generation, circulation and confirmation of digital assets rely on new value exchange technology. The digital form of assets can be either a series of binary encrypted information, or it can be expressed in the form of centralized or distributed ledgers. In the future, it can also be qubits. The form of quantum information stored. In terms of value transfer, both the Token mode and the Account mode can be used, and the various modes can be converted into each other.

Here we focus on blockchain technology. Since the development of the Internet, it has initially completed its phased mission: connecting people and information. At present, even high-consumption and inefficient scenes such as personal live broadcasts can be fully supported, which is enough to illustrate the enormous energy of the Internet. However, due to the characteristics of easy deletion, easy change, and easy replication of electronic data, existing network security technologies are difficult to ensure efficient, secure, and orderly circulation of high-value data on the Internet. Therefore, value exchange on the Internet still depends on the completion of the financial network. The value of the transfer. In addition, because of the property rights of data, data is still formed by countries or institutions, forming an island, and it is difficult to form synergies between data.

As a trusted machine, blockchain technology creates a new paradigm that connects the various parties involved in financial services, breaking data silos, improving data security, reducing transaction costs, and enhancing risk control capabilities. This is also the blockchain. The reason why technology is receiving much attention. It can be said that the blockchain carries too many ideals and has won the enthusiasm of capital and industry.

All kinds of beautiful words conceal the flaws of this technology in Bitcoin and Ethereum. In such an atmosphere, researchers and technicians should calm down and carefully analyze and explore the shortcomings of improving blockchain technology, such as how to meet the requirements of high concurrency scenarios and how to interact with other non-blockchain systems. How to solve the data privacy problem on the blockchain, how to combine the smart contract with the current regulations, how to design a governance mechanism suitable for the blockchain, the formulation of standards, and so on.

China is a big Internet country and certainly a big data country, but it is more about quantity than quality. How to improve quality in terms of quantity advantage, transform data resources into value assets, generate credit and serve the real economy, and finally promote social and economic development is undoubtedly a difficult problem and challenge in China's financial science and technology field.

And this is precisely the key to the digitalization of assets.

In The Secrets of Capital, Hernando de Soto described the process of capital creation: “The formal ownership system provides the processes, forms, and laws that enable us to embody assets as active capital. … The method of processing assets into capital is to carefully describe the most valuable aspects of assets in the economy and society, to make them recognized in the record system, and then to organize them very effectively and to include them in In the ownership document."

As a credible technology, the blockchain is endorsed by many parties and endorsed by many parties. It is a technological prototype of a new generation of financial infrastructure. It can “bless” credits for the underlying entities that are not reachable by existing financial institutions, enhance mutual cooperation and reduce transactions. Cost, which is likely to create a new situation for SMEs and marginalized groups that credit and loan resources have not been able to penetrate well, and this is of great significance to the country's economic development and financial supervision.

Third, the assets from the financial, Pratt & Whitney sharing

The production and circulation of digital assets is very different from the existing financial system. The deeper meaning of asset digitization is that data information is native, can be penetrated and traced, and can be self-certified and proved by itself, thus extending the concept of finance. There are three typical characteristics of finance: one is that the user controls the digital identity independently; the other is that the user controls the digital assets and assumes the transaction responsibility; the third is the peer-to-peer transaction between users, which can be independent of the third-party intermediary.

Picture 1

Digital finance can be both self-disciplined and self-disciplined. It is a financial technology system that builds a high degree of personal privacy protection based on the full disclosure of underlying information. While producing data, users are also creating digital assets and adding various elements to innovative digital financial services.

Taking SME asset securitization as an example, China's SMEs have a long history of financing difficulties, and they have received much attention. In the process of actual business development, they have been faced with many participants, scattered information sources, and underlying asset information, which is difficult to wear. Through such difficulties, SMEs cannot truly use asset securitization tools to revitalize assets and effectively obtain financial support. How can SMEs have equal access to information and self-financing? An effective solution is to use distributed ledger and distributed file system technology to synchronize the full amount of native information of the underlying assets, and use public and private key technologies to realize the rights holders to hold and transfer assets through the core enterprise information service providers. Access, continuous and effective disclosure of the underlying real trade background, thus forming digital assets.

Digital assets give traditional assets a high degree of autonomous liquidity, greatly improve the efficiency and authenticity of supply chain financial services, and establish a dynamic, complete, authentic and credible information disclosure mechanism for investors to fundamentally solve the underlying SMEs. The information penetration problem of multi-level asset transfer allows SMEs to gain equal rights, no need to rely on core enterprise credit, and independently carry out financing activities. At the same time, financial institutions can directly obtain financing through trusted DLT ledgers without relying on core enterprises. Information on the underlying assets of SMEs required.

This is the digital value of assets and the practical value and significance of the new model of finance. It makes the disadvantaged groups in traditional finance no longer weak, no longer financing, financing is expensive, finance will become closer to the entity, more universal sharing, and at the same time With the support of modern technology, its security and regulatory convenience are not comparable to traditional financial assets, and can flexibly compensate for the gaps in existing financial services.

Fourth, financial integration, free and open

The development of digital finance will blur the boundaries between the field and the field. In a sense, one of the main reasons for the emergence of on- and off-market stratification in the market is that the degree of technical credibility is not in place. Traditional technology does not solve the problem of trust in financial transactions. Therefore, many transactions need to be carried out in an organized market (and of course economies of scale), and the legally recognized legal guarantees solve the problem of credibility. With the development of modern digital financial technology such as blockchain, technology credibility has become a complementary means of legal credit enhancement. Through the empowerment of trusted technology, the data and value of the original "two skins" are truly aggregated into a digital asset of physical and logical integration. Numbers are values, values ​​are numbers, and the flow of numbers is the flow of value. Any asset can be digitized using trusted technology, and the stream carousel will live without relying entirely on legal credit. At this time, what is on the market and what is off-site will no longer be "clear."

Digital finance may restructure financial operations, service models and the entire ecosystem. It is concise and clear, transcending time and space and physical boundaries, breaking national boundaries, being free and open, and respecting the autonomy and willingness of market participants. Driven by technology, it does not rely on traditional financial intermediation to allow assets to circulate while retaining the full amount of information.

Non-standardized assets that were originally “silent” on the sidelines, such as warehouse receipts, intellectual property rights, contracts and other assets, will renew a new financial “life force”, low-cost, high-efficiency circulation, economic prospects and meaning immeasurable . What is more revolutionary is that asset digitization will lead to the financial retail revolution. Just as the emergence of the Internet has spawned retail giants such as Ali, the awakening of the retail financial market will bring more profound financial changes.

V. New forms of currency, independent control

Digital assets call for digital currency! In this regard, both the private sector and the public sector are working.

Virtual currency is correcting the fundamental flaw of lack of value support. From the lack of basic asset support of Bitcoin, to the exploration of various stable tokens, or based on legal currency mortgages, or based on algorithms, and then to the intervention of regulatory authorities, the stable tokens based on the legal currency mortgage have been anchored due to the value anchoring of the legal currency. Letters, and the recent emergence of JPM Coin and Facebook Libra, the problem of unstable virtual currency values ​​and non-compliance is expected to be resolved. On the surface, the value of virtual currency is anchoring the central bank's currency, which is actually “de-virtualization”.

Therefore, the concept of cryptocurrency and virtual currency needs to be re-examined. The cryptocurrency is no longer necessarily a virtual currency. It is necessary to splash the dirty water and pick up the child. In a sense, distinguishing between cryptocurrency and virtual currency is of great significance.

The cryptocurrency has the potential to become a real currency, but at the monetary level, it is not necessarily the number M0, but it may also be a higher level of currency than the bank deposit currency: Mn. Compared with the digital M0, the digitization of high-level currencies such as M1, M2…Mn or more is imaginative.

The central bank has always been considered unsuitable for the role of digital money supply. In addition to the narrow banking concerns, the main concern is that when digital currency is issued to the C-end (retail client, the public), the central bank may face enormous service pressures and costs. This is one of the difficulties faced by countries in the process of developing legal digital currency. At present, the central bank digital currency tests carried out by various countries, such as the Bank of Canada Jasper project, the Singapore Monetary Authority Ubin project, the European Central Bank and the Central Bank of Stella project, are experimenting with cryptocurrency technology, but still stay at the B-end (institutional) application scenario. .

According to IMF economists Tobias Adrian and Tommaso Mancini-Griffoli and others, 100% of the reserve is paid to the central bank's Alipay and WeChat payments, which is equivalent to trading with central bank liabilities, essentially the central bank's digital currency. If so, China is already the world's first big country to realize the digitization of legal currency. Of course, this is only version 1.0. It should be noted that the 100% asset reserve proposed by Facebook's Libra white paper and the 100% reserve requirement that everyone says are not a concept. The former transfers funds to third parties, while the latter deposits all funds to the central bank. .

Technically, 100% reserve deposit means that the whole life cycle of digital currency issuance, circulation, recovery, and destruction must be attached to the traditional account system, especially the circulation of digital currency across the central bank, except for the central bank’s digital currency book update. It also has to deal with the clear settlement between the corresponding reserve accounts, which not only increases the pressure and complexity of the central bank's central system, but also makes it difficult to achieve the requirement of “loose coupling of accounts”. It is not easy to develop from financial innovation, and the imagination of cross-border payment The space is also greatly discounted. In contrast, Central Bank Crypto-Currencie (CBCC) allows customers to truly manage their own currency, rather than entrusting them to third parties, giving them the ability to control themselves, and can also cross Swift and open up new cross-border payments. The battlefield, currently seen, should be the hottest frontier.

Bank of England Governor Carney believes that Libra-like digital currency will be a better choice for the global reserve currency. My understanding is that digital currency is not just the digitization of legal currency. Just as digital assets are not just as simple as asset digitization, the future digital currency needs to repair the drawbacks of the existing monetary system, surpassing the US dollar and upgrading.

Sixth, respond to new ideas, supervise technology

The various characteristics of the above digital assets, whether they are diverse in attributes, integrated and innovative, or technology-driven, free and open, have brought new propositions and challenges to financial supervision. Traditionally, the regulatory paradigm with license management as the key, financial institutions as the starting point, and the opening of accounts in financial institutions as the core needs to be re-examined.

First, the license management of institutional access should be transformed into the authority management of user access.

In the self-finance mode, the user must pass the identity authentication and verification of the relevant certification body. The business process must be isolated from the identity authentication, and the cryptographic primitives and schemes are used to realize the transaction identity and content privacy protection. The management department has the right. Conducting penetrating supervision. On this basis, national regulatory authorities will collect their own residents according to their digital identity and delineate digital jurisdictions. In the digital jurisdiction, national regulatory authorities set various types of business participation rights for their resident nodes in accordance with KYC, AML/ATF and other financial regulatory policies.

The financial business and capital exchanges between domestic residents and non-residents are regulated by national regulatory authorities in accordance with their respective capital account liberalization and cross-border financial regulatory policies. This design not only guarantees the freedom and openness of financial business, but also fully meets the regulatory requirements of various countries. Take Facebook's regulated financial subsidiary Calibra as an example. Its first product is the Libra digital wallet. Facebook uses the Calibra wallet to connect the social user's identity information with the Libra user's blockchain address. The wallet replaces the licensed financial institution. The subject that has been supervised in the financial environment can implement the regulatory strategy in accordance with the specific requirements of the jurisdiction, taking into account the requirements of user privacy protection and regulatory compliance.

Second, business approval, should increase the smart contract review.

In the financial mode, traditional financial services will be logically coded into smart contracts that are transparent, credible, auto-executing, and mandatory. Smart contracts carry a variety of financial services, and even a smart contract represents a financial format. In a sense, managing a smart contract will manage the future of the financial business. On the basis of safe and efficient user identity authentication and rights management, smart contracts should be required to pass the verification of relevant departments before going online, to determine whether the procedures can be operated according to the policies of the regulatory authorities, and if necessary, the regulatory authorities can prevent disagreement. The smart contract is closed or the resident's authority to execute the smart contract is closed, and a regulatory intervention mechanism that allows the code to suspend or terminate execution can be established.

In addition, the parameter setting of smart contracts is also a means of supervision. Just like the use of regulatory indicators such as statutory reserve ratio and capital adequacy ratio to prevent and control bank risks, regulators can also control and control financial institutions by adjusting or intervening in smart contract parameters. Business size and risk.

Responding to financial technology with regulatory technology is a response to the trend. In the face of new digital assets, the regulatory authorities of various countries have “confused the five flavors”, on the one hand, they have recognized its innovative significance, while on the other hand, they are worried about being uncontrollable. In essence, under the means of digital technology, digital assets are not only controllable, but supervision can be more precise. In a sense, instead of worrying about the future being uncontrollable, it is better to be more vigilant than to be too strict.

General Secretary Xi Jinping pointed out that deepening the structural reform of the financial supply side must implement the new development concept, strengthen the financial service function, and identify the key financial services to serve the real economy and serve the people's life. Digital finance featuring asset digitization will follow the new development concept of “innovation, coordination, green, openness, and sharing”. Through the innovative application of modern technology, it can revitalize existing assets at a higher level and activate marginal assets in various fields. Deepen the structural reform of the financial supply side and promote the high-quality development of the real economy with broad prospects.

My speech is here, thank you all!

Guest introduction

Yao Qian, Doctor of Engineering, professor-level senior engineer, doctoral tutor, academic member of Shanghai New Financial Research Institute, general manager of China Securities Depository and Clearing Corporation. He once served as director of the Digital Money Research Institute of the People's Bank of China, deputy director of the Science and Technology Department of the People's Bank of China, inspector, secretary general of the National Financial Standardization Technical Committee, and deputy director of the Credit Information Center of the People's Bank of China.

Postdoctoral research station of the People's Bank of China Financial Research Institute, member of the Academic Committee of the Postdoctoral Research Station of the People's Bank of China Credit Information Center, member of the China Electronics Society Blockchain Expert Committee, member of the Academic Committee of the Tsinghua University Blockchain Technology Joint Research Center, published an article 150 articles, 6 books, won the first prize of provincial and ministerial awards such as the Bank Science and Technology Development Award, and many patent inventors.