Financial Times: Central banks should learn to include digital payments in China instead of issuing digital currencies

The central bank does not rush to compete with companies like Facebook, Tether and WeChat or directly ban them. It is better to include digital payments in the central banking business like the People's Bank of China and focus on what they do best: management stability Sex.

The Financial Times reported on Tuesday that the central bank should not issue digital currency because it does not have the ability to deal with individual customers and also involves compliance checks.

The article said that recently cryptocurrency developers are beginning to pay attention to the stability of cryptocurrencies, which they have been evading. This is predictable to some extent, because the dynamics of highly volatile currencies are entirely from the confidence of speculators, but this is always limited. If everyone uses currencies of different types or different values, then the basis for all users to use that currency is compromised.

In order to solve this problem, stable coins were created. In order to avoid the volatility common to traditional cryptocurrencies, stable currencies are supported by government-issued currencies such as the US dollar, the euro, and even the renminbi. The most famous of these is Libra, which Facebook plans to launch, in addition to the US dollar stable currency USDT from Tether.

The rise of these stable currencies can be seen as a victory for the government currency linked to it. But as its popularity grows, non-bank stable currencies pose a challenge to the central bank's control of money supply, especially if these stable currencies are supported by safe assets such as government bonds rather than cash.

Central banks in some countries, such as the People's Bank of China, have already stipulated that non-bank issuers such as WeChat must hold cash instead of bonds, and the cash used to support their digital currency will be deposited in the central bank rather than the private sector.

Other central bank governors are also considering issuing their own "digital currency", the central bank's digital currency (CBDC). They believe that the growth of stable currencies reflects the market gap caused by the failure of the official banking industry to meet the demand for low-cost, friction-free cross-border payment systems.

Therefore, they believe that the central bank should fill this gap by issuing digital currency to the public. This is easy to achieve because the central bank has provided efficient digital real-time settlement services for the banks they supervise. Proponents of the CBDC believe that there are other benefits that would allow the central bank to impose negative interest rates very broadly when necessary and provide the market with unlimited security assets.

However, historically, the central bank has been evading the personal service business and is more willing to focus on trading with its authorized and controlled institutions.

First, there are issues of competition and privacy. The real risk is that CBDC may make it harder for banks to attract money, thereby weakening their ability to provide loans. This may in turn put pressure on the central bank to directly enter the loan market for compensation. The central bank is the cheapest personal payment and loan provider, and it will start like a monopoly state-owned bank.

Even if there is no competition, the central bank should be cautious in entering its personal business. Providing quality services that meet modern regulatory standards in a highly competitive environment is no easy task. The central bank does not have the profit-oriented, customer-oriented professional capabilities.

The issuance of CBDC will force the central bank to take over everything from handling public complaints and user inquiries to performing “know your customers” and anti-money laundering checks. Given their lack of experience in this area, they cannot guarantee that they will be able to manage these jobs cheaper and more efficiently than the average bank.

The CBDC will also face privacy paradoxes. If they guarantee the privacy of the transaction, then this may make the government agency suspected of encouraging money laundering, which is intolerable. If privacy cannot be guaranteed, some people may say that Facebook violates privacy, but at least it is not a state-owned entity.

The central bank does not rush to compete with companies like Facebook, Tether and WeChat or directly ban them, but it is best to incorporate digital payments into the central banking business like the People's Bank of China and focus on what they do best: management stability Sex.

After that, if the stable currency becomes so popular that its reserves begin to become a loan limit, the central bank can begin to charge negative interest rates on these reserves and decide how much to charge customers.

Author: Xiu MU