Viewpoint | Digital currency will open the currency scenario for blockchain technology applications

In the fields of international exchange and international settlement, digital legal currency will completely open the international currency scene of blockchain technology application, and greatly expand and promote the international innovation of digital financial system.

The issuance and operation of digital legal currency will completely open the currency scene of blockchain technology application, enrich and improve the currency source of blockchain technology application; at the same time, the application of blockchain technology will greatly expand the demand for digital legal currency, enrich and enhance The function, structure and level of the digital legal currency account system; further, the curtain of digital financial international innovation will gradually and comprehensively develop.

Bank currency: not suitable as a source of currency for blockchain technology applications

Currently, before the issuance and operation of digital legal currency, the blockchain technology innovation application has a single source of money, only bank currency, and no additional currency options. The bank currency is both the counter currency and the book currency of the paper statement. Fundamentally speaking, it is not suitable as a source of money for digital finance. Digital finance and its digital technology represented by blockchain should not use the bank monetary system as a source of money, nor is it suitable for its use as a monetary base:

First of all, the bank currency comes from itself, essentially originating from the counter, and its currency runs in the big system of the front and the back. This system has more transaction records and trading nodes, many control links, and obvious physical characteristics and restrictions. Although the continuous investment in science and technology and the information technology equipment have been continuously improved over the years, the physical properties of bank currency are still clear, still in the physical environment, and the efficiency is much lower than the digital trading and decision-making options under the mathematical environment. Terminal coverage reached by bank currency is limited in space and time. In view of this, it is difficult for bank currency to meet the needs of the digital economy. Secondly, the financial accounting process of bank currency makes its operation completely limited by its operating cycle or business hours. It is not suitable for digital finance to operate seamlessly 24 hours a day, and the time rhythm is not Matching greatly reduces the effectiveness of digital financial activities supported by blockchain technology; again, although blockchain technology uses technical arrangements such as Token tokens, it reduces or even eliminates the incompatibility of bank currencies, but in digital accounts and The exchange link between bank accounts is still limited by the bank's monetary system. This limitation is a fundamental constraint. Although people often consciously or unconsciously ignore this fundamental constraint, or even think that this is only a pre-existing obstacle, with the deepening and expansion of blockchain technology innovation application, this The fundamental constraint will be “suffocating”. In view of this, it is not appropriate for bank currency to be the source of sub-optimal currency; in the end, some applications of blockchain technology based on bank currency, such as bills or supply chain finance, are in fact one of the existing business models. A kind of supportive support, and improvement and improvement, is not a new financial model or even a format brought about by the blockchain technology itself. Even as an auxiliary support, the application of blockchain technology is limited by the bank's monetary system, failing to exert its potential and failing to demonstrate its potential.

Compared with digital financial innovation, the bank's monetary system is a “cooked seed”. It cannot “live” the “root” of digital finance, “send” the “bud” of digital finance, and even “open” digital finance. "Flowers", "knot" the "fruit" of digital finance, must open a digital account system outside the bank account system to solve the currency's own monetization problem. In other words, blockchain technology must operate on a digital currency basis with ample and efficient source of digital currency.

Some opinions suggest that the central bank's issuance of digital legal currency should adopt a decentralized blockchain technology arrangement, so as to ensure the wide applicability of blockchain technology applications. This understanding is very narrow. First, the central bank's issuance of digital legal currency is necessary to meet the needs of the digital economy, not just to promote a certain digital technology. Secondly, compared with bank currency, digital currency is more suitable to meet the currency source needed for the application and promotion of blockchain technology. Finally, the central bank’s issuance of currency itself is central, and this is a legal setting that is unmovable. From this, there is even a view that, according to this, “non-stateization of money” should be achieved. The problem is that any monetary evolution must ensure certain inheritance and continuity. This is also the fundamental requirement for the stability of the economic and social reality system. It is impossible to imagine and recognize that it is a direct jump from a sovereign national currency to a non-state. The digital currency comes up. Therefore, in terms of the blockchain technology position and its broad application prospects, the problem lies in obtaining and establishing the source and basis of digital currency other than bank currency, rather than negating the central bank's issuance and operation of digital legal currency.

Electronic money: not suitable as the monetary base for blockchain technology operation

In the real economic society, electronic money is a kind of bank currency. In most cases, it is used as a payment instrument. In the accounting process, bank electronic money is often embodied as a payment instruction. The payment order is issued using the electronic money account and is recorded in real time. However, the bank accounting in the background is still operated according to the accounting process of the bank account system and the corresponding accounting period. In other words, bank electronic money reflects the currency accounting activity between bank accounts, which is itself a virtual “unnecessary” state.

So, is there any electronic money that does not exist independently based on bank accounts?

Technically, it can already be realized, but it is still necessary to construct a corresponding account system, that is, an electronic money account system that is independent of the bank account system. Even so, e-money itself is still illusory, just the numbers in the e-money account. E-money that is completely out of the account is a kind of structure, with no technical support and no commercial necessity. Keynes wrote in his "Monetary Theory" that "modern currency is the account currency." In other words, the change in currency form is actually a change in account form, electronic money, digital currency, or in fact, an electronic account. The numbers in each of the currency or the digital account currency are inseparable from their respective account systems.

So, is the non-bank account system an electronic account or a digital account?

Historically, the non-bank account system first made breakthroughs in electronic technology, which became a theoretical possibility, but it did not become a monetary economic fact; in reality, the online digital account system actually happened and obtained The performance. So, is the network digital account system technically equivalent to the electronic money account system? Here, there are many perspectives or positions of interpretation, which also cause cognitive and conceptual ambiguity between electronic money and digital currency. Frankly speaking, the digital account system does not need to rely on electronic account technology and its philosophy to actually happen and operate. In other words, digital currency is not electronic money.

The so-called "electronic money" as the monetary base of digital financial technology either does not clarify the essence or reality of electronic money, or imagines that digital technology such as blockchain can be connected with electronic technology. If this concept is entangled, It is incredible and incomprehensible.

In other words, even if electronic money is the latest form of bank currency, or even technically independent of the bank account system, digital currency is neither necessary nor realistic to operate on the basis of electronic money. Nevertheless, the closest bridging between digital legal currency and bank currency is still in the electronic money link. This includes not only a large number of exchanges, transfer payments, etc., but also a systematic connection. In particular, as far as China is concerned, the connection between digital payments and bank payments plays an irreplaceable role as the latest bank currency in the form of electronic money. It is based on this that the People's Bank of China is issued as a digital legal currency, which is not referred to as CBDC, but is called DCEP.

Digital economy and digital finance require digital currency. Although digital legal currency and electronic currency have the necessary links, the innovative application of digital technologies such as blockchain should be based on the digital legal currency system, not the bank currency system or its electronic upgrade.

Digital Legal Currency: A digital currency scenario that will completely open the application of blockchain technology

Realistically, the digitization of payments and the digitization of assets are two parallel roads for digitization of money, each with its own advantages and disadvantages. China is taking the road of digitization and was once away from the road of digitalization of assets. Even so, for the blockchain technology, the economy and society still adopt a positive attitude and support position. The issuance and operation of digital currency will completely open up the monetary scene of blockchain technology application, on the one hand, it has a suitable source of money, on the other hand, it also establishes its solid monetary base; and, in turn, the innovation of digital technologies such as blockchain Applications will greatly expand the demand for digital currency, and will greatly enrich and enhance the functionality, structure and hierarchy of the digital legal currency account system.

First, the digital legal currency replaces the bank currency and becomes the monetary source and monetary basis for the innovation and application of blockchain technology.

It is not difficult to find that digital legal currency is usually defined as two types: "account-based" and "not account-based". This "account" refers to "bank account". In general, digital currency is not based on bank accounts. The so-called "two-tier structure" of the issuance and operation of digital French currency is not the dual structure of the digital legal currency account and the bank currency account, but the two-tier structure of the digital legal currency account system itself. This requires further clarification of the relationship between digital legal currency and bank currency. In general, there are mainly three: First, digital legal currency and bank currency are both “legal currency”, and “nominal currency” under sovereign legal currency does not change. The currency unit of the account is consistent; secondly, the price of the digital legal currency and the bank currency is fixed at 1:1, that is, no change in the currency standard occurs; third, there is a de facto exchange platform between the two currency forms, that is, the number As a new currency, the issue of the legal currency is a purchase-type issue. In other words, the source of the digital legal currency is the bank currency, which is reflected in the partial replacement of the bank currency by the demand for digital legal currency. This is also the so-called replacement of M0. In addition to technical considerations, bank currency and digital currency have different operating routes, financial operation procedures, and fund account periods. There is a “big diversion” between bank currency and digital currency. This diversion is the division of the account system, but it cannot be confused. This establishes a new source of money and a monetary base for the innovative application of blockchain technology.

The mutual support and support of digital technologies such as blockchain and digital legal currency will become the main technical source and monetary base of the digital economy. In fact, both of them will be in the same digital currency economy system, all on the so-called online, without the need to arrange online and offline currency conversion, and there is no time adjustment brought by the counter business hours or the book financial process; Cross-community or cross-chain arrangements, based on the distribution and operation of digital currency, provide digital accounting currency units or price comparison standards, simplify transaction processing and technical coordination between different digital assets, and strengthen the application of blockchain. Openness and transparency also enhance its applicability.

Secondly, to a considerable extent, the innovative application of blockchain technology will greatly expand and stabilize the scale, structure, level and function of digital legal currency demand.

Blockchain technology is struggling in the direction of payment digitization, and has not made a fundamental breakthrough; on the contrary, it is arrogant and fruitful in the direction of asset digitization. The reason is that on the one hand, the centralized centralization of payment, the ability to effectively expand the digital payment function, and the large-scale, large-scale promotion of the business model and even the digitization of the social economic system; on the other hand, the blockchain technology The centralized distributed technology arrangement is more suitable for the development of digitalization of community assets. In short, digital payments are more effective through centralized technical arrangements, while asset digitization is more appropriate through distributed decentralized technical arrangements. This is why the blockchain technology is lacking in the construction of a digital payment account system. Therefore, what can be expected is how the blockchain technology can expand the scale, structure, level and function of the digital legal currency account system.

The issuance and operation of digital legal currency, first of all, is the exchange of cash, becoming a new source of money for digital payment instruments such as Alipay and WeChat payment; next, it will also open up a direct and progressive alternative to the public scene. Existing bank payments and digital payments. These will improve and enrich the account system of digital legal currency, and will introduce a large number of innovative applications of blockchain technology, further build and increase the account structure and level of digital legal currency, and form a basic pattern of mutual blessing and support.

The innovative impact of digital legal currency issuance and operation is extremely powerful, and it is fundamentally in the expansion and deepening of the digital account system. The existing digital legal currency account system is centralized. However, it is not only feasible but also necessary to establish a series of innovative account systems based on the digital legal currency account system and the digital legal currency as the source of money. The expansion space is even greater. The idea of ​​separating the centralized digital currency from the decentralized blockchain technology is a very narrow position and a wrong view.

In June this year, the Austrian authorities successfully issued and ran digital stamps based on blockchain technology. By extension, the relevant authorities in various economies can also issue digital lottery and digital bonds. The central bank can also issue digital commemorative coins and special digital legal coins, and so on, and so on. These securities are technically centralized, or decentralized, but are essentially digital and supported by the digital account system, which means that the digital account system will have a large structure. The upgrading and expansion will be directly linked to the digital legal currency account system, and more will be the unified digital legal currency account system. At this point, the issuance and operation of digital legal currency will greatly promote monetary innovation, commercial innovation, and asset innovation in the digital economy, which will promote or lead to the structuring and stratification of the digital account system on a large scale. Existing centralized currency or payment arrangements, and decentralized technological innovations, or some conflicts of ideas or actual contradictions, will be solved, improved, extended in the expansion of structure and stratification. A new situation in which legal currency and blockchain technology are coordinated, promoted and developed will generally take shape.

Therefore, digital legal currency will fundamentally release the innovation potential of blockchain technology and greatly exert its technological potential; the innovative application of blockchain technology will also expand, enrich and continuously improve and improve the structure of the digital legal currency account system. The level, fundamentally promote the innovative application of digital legal currency, and greatly expand the multi-level needs of digital legal currency.

Digital innovation: extending from domestic payments to international assets

Digital legal currency is a big digital innovation, not only technological innovation, but also currency innovation, and it is the innovation of asset form. The issuance and operation of digital legal currency will be extended to the international arena, thus promoting the two ways of payment digitization and asset digitization to the convergence of the two.

Economic figures require digital payments and more digital currencies. There are two main ways to digitize money: payment digitization and asset digitization. In short, China has embarked on the road of paying for digitization, making great progress and making great achievements. In the international arena, most of them are rushing into the road of digitalization of assets, and the tide is surging. In other words, China's payment digitization is based on centralized technology arrangements, while international asset digitization often relies on decentralized blockchain technology applications. It should be said that China did not choose to pay for the digitized one-way line from the beginning. Instead, after several years of payment digitization and asset digitization, it suspended or even suspended the asset digitization option, and became the world's only digital payment power.

In China, there are two dilemmas in paying digitization: First, large-scale digital payments are private digital payments, and private digital payment scenarios are opened, which is closed to public scenes: corporate institutions and government departments do not have digital payments. Means and functions, only in the personal payment from the limited use of personal digital payment port docking, to achieve the personal direction of the collection of digital; corporate capital transactions, and even the flow of government funds, etc., are based on bank payments; Private digital payment platforms are not connected, or even separated from each other, and the private scene is actually split. This means that the digitization of payments cannot be naturally upgraded to currency digitization. It requires the central bank to take a fundamental step – issuing digital legal currency to overcome the dilemma of private digital payments, so that all sectors of the entire economic system can fully realize the payment of digitization. Through the payment scenario, and promote a series of major monetary changes.

Internationally, the way to digitize assets is to obtain “digital currency” by encrypting digital assets. Realistically, although a large number of “encrypted digital assets” are invested in the real social economic system in the name of “digital currency”, they are still limited to asset attributes, and have not obtained monetary attributes, nor have they become effective figures. Payment instrument. From the historical experience of currency evolution, a new monetary pattern from emergence to recognition, generally to break through two barriers: one is generally accepted and applied in small-scale retail payments; the second is large-scale wholesale or corporate and government agencies Universal adoption and reinforcement. Realistically, encrypted digital assets have not made any substantial breakthroughs at these two points, or even received a series of restrictions from various authorities; even under the protection of “regulatory tolerance”, the process of monetization of digital assets It is still difficult to achieve results, and the fundamental breakthrough is that it is recognized as an “asset” in the market and even legally confirmed.

In view of the excessive fluctuations in the price of digital assets, its payment function has been deterred, and the so-called “stabilized currency” has been launched internationally, making it close to realizing currency functions. In fact, the stable currency is only a temporary arrangement in the blank period before the emergence of the digital currency. At most, it has some transitionality: whether the bank's legal currency is successfully tested remains to be tested, even if it succeeds, it does not predict the future. Ability to successfully anchor digital currency. In other words, the issuance and operation of digital legal currency will greatly squeeze the market demand for stable currency, especially in the field of international exchange. If the relationship with the digital legal currency cannot be stabilized, the potential currency property will eventually be lost. A rapidly shrinking encrypted asset.

In view of the issuance and operation of digital legal currency, it will provide an effective source of money and a stable monetary base for the innovation and application of blockchain technology. The international approach to asset digitization will not only shrink, but will greatly expand. Digital assets based on digital currency will be developed in an endless stream. Not only the private sector, but also the authorities will try to develop encrypted digital assets supported by blockchain technology in the international arena. This not only expands the foundation and scale of asset digitization, but also promotes the international convergence of asset digitization and payment figures. Especially in the fields of international exchange and international settlement, digital legal currency will completely open up the international currency scene of blockchain technology application, and greatly expand and promote the international innovation of digital financial system.

(Author: Zhou Ziheng, Zhejiang Digital Technology Research Institute of modern finance director Editor: Su Qi)

Article source: Financial Network