"Digital Renminbi" is virtualized: the portrait is gradually clear, and there is no timetable for launching

More and more information about China's legal digital currency (DC/EP) has surfaced. Compared with the low-profile research and development in the past five years, this year, especially since August, the central bank seems willing to reveal more information. This is undoubtedly a hint that we will usher in a change in cash, and the "digital renminbi" will gradually become more and more Clear.

However, the "Digital Renminbi" pilot and even the full implementation will not be as rapid as some media have described. On September 24, Yi Gang, governor of the People's Bank of China, clearly stated in response to a reporter's question that the central bank “has no timetable” for the introduction of legal digital currency, and that “there will be a series of research, testing, pilot, evaluation and risk prevention. ". Industry experts pointed out that before the "digital renminbi" is ripe, it needs sufficient and meticulous preparation.

The central bank frequently voiced the "digital renminbi" cautiously

Two years ago, at the beginning of the establishment of the Research Institute of the People's Bank of China, the legal digital currency was still a relatively illusory concept, and did not enter the public's field of vision too much. With the increasing availability of relevant information in recent times, the face of legal digital currencies is becoming clearer.

Mu Changchun, director of the New China People's Bank of China Digital Currency Research Institute, is regarded by the outside world as one of the important signals of the "digital renminbi". In the past month, the central bank has intensively mentioned the legal digital currency, and this new thing has been pushed to the cusp of public opinion.

After August this year, the central bank repeatedly mentioned the legal digital currency. On August 2, the central bank held a video conference to deploy key tasks in the second half of 2019, referring to “accelerating the pace of research and development of legal digital currency in China”, and on August 10, Mu Changchun and the People’s Bank of China The Deputy Director of the Payment and Settlement Department gave a keynote speech on the legal digital currency at the China Finance 40th Yichun Forum and said:

"Since last year, the relevant personnel of the Digital Money Institute have done related system development, which is already 996."

On August 21st, the official WeChat public account of the central bank published the full text of Mu Changchun’s speech on digital currency. The simultaneous publication of a speech by Fan Yifei, deputy governor of the People’s Bank of China, was published in January 2018. The article on currency considerations. The ideas revealed by the two are highly consistent, and outline several important characteristics of the central bank's digital currency: the current central bank digital currency is M0 (cash) replacement, not M1, M2 replacement; the central bank does not directly issue digital currency to the public. The two-tier operation system will be adopted, that is, the People's Bank will first convert the digital currency to the bank or other operating agencies, and then exchange these institutions for the public. In this process, the centralized management mode will be adhered to.

More interesting information is that Mu Changchun started the course with the title of “Libra and Digital Currency Outlook” in the APP course, and told the public about the “unpredictable” digital currency in a more popular language.

At present, in addition to China, central banks such as Singapore, Canada, and Sweden are also conducting research on legal digital currencies, but the connotations and research paths of their respective legal digital currencies are not the same. From the current public information, only the digital currency e-krona proposed by Sweden and China's digital currency DC/EP have similarities in terms of attributes, all of which are substitutes for M0 (cash), but the difference is that China The central bank's digital currency is a two-tier operating system, while e-krona is a single-tier operating system, that is, the central bank issues digital currency directly to the public.

The central bank has been studying digital currency since 2014. The progress of related work has been very low-key in the outside world. Recently, the exposure of many important information has triggered high expectations for the introduction of legal digital currency. "Digital currency began to conduct closed-loop testing" and "7 market institutions participated in the issuance" and other news from time to time, but according to the "Economic Information Daily" reporter, some rumors are not accurate.

Yi Gang made a clear statement in response to a reporter’s question a few days ago:

"We don't have a timetable right now. I think there will be a series of research, testing, piloting, evaluation and risk prevention, especially if digital currency is used cross-border, there are anti-money laundering, anti-terrorism financing, anti-tax haven and 'know Your client's wait for a series of regulatory requirements."

According to industry analysts, Yi Gang’s statement is actually cooling the market expectations. The introduction of legal digital currency will be more cautious. The speed of promotion will be “faster or slower” and the rhythm needs to be grasped in the hands of the central bank.

No need to bind bank accounts without network

From 2014 to the present, the research on the central bank's digital currency has been going on for five years. “Maintenance of the centralized management model”, “M0 replacement”, “two-tier operation system” and “satisfying high concurrency performance” outline the general outline of “digital RMB”. However, such wording is too embarrassing for the public. The interpretation of the old and the younger is that it is as easy to circulate as cash, can be anonymous, does not need to be bound to a bank account, and does not require a network, "as long as the phone has electricity."

According to Mu Changchun's description in early August, the legal digital currency is “loosely coupled to the account”, which can realize the value transfer from the traditional bank account, and the transaction link 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.

Fan Yifei’s article “Some Considerations on the Digital Currency of the Central Bank” describes the central bank’s digital currency in more detail. According to the article, at this stage, M1 and M2 have been electronically or digitized based on commercial bank accounts, and there is no need to digitize them again with digital currency. In contrast, the costs of issuing, printing, returning, and storing existing banknotes and coins are relatively high, and there are many levels of circulation systems, and they are inconvenient to carry, easy to be forged, anonymous and uncontrollable, and illegal for money laundering. The risk of criminal activity and the need to digitize it are increasing. In addition, non-cash payment instruments, such as traditional bank cards and Internet payments, are based on the “tightly coupled” model of the account and cannot fully meet the public demand for easy-to-use and anonymous payment services. It is impossible to completely replace M0, especially in accounts. In areas where services and communication networks are poorly covered, people’s dependence on cash is still high. The central bank's digital currency maintains the attributes and key features of cash, meeting the needs of portability and anonymity, and will be the best tool to replace cash.

"You can imagine a scenario like this: As long as you have a DC/EP digital wallet on my mobile phone, even the network does not need it. As long as the mobile phone has power, the two mobile phones can touch one person and can put a person in the digital wallet. Digital currency, transferred to another person."

Mu Changchun recently said in the APP course.

For example, Mu Changchun said that if you go to the underground supermarket to buy things, there is no cell phone signal, WeChat, Alipay can't use it, or you can pay for a flight on a cheap airline. In the future, you can use the central bank's digital currency to pay. The more extreme situation is the big earthquake. "Communication is broken, and electronic payment is of course not good. There are only two possibilities left at that time, one is banknotes and the other is the central bank's digital currency. It (the central bank's digital currency) We don't need the network to pay, we call it 'double offline payment', which means that both the payment and the payment can be paid offline. As long as the mobile phone has electricity, even if the entire network is broken, payment can be realized.

Zhou Tong, CEO of Jingtong Technology and co-founder of MOAC Blockchain, told the Economic Information Daily that the management of cash has three characteristics: one is anonymity, the other is to protect user privacy, and the third is that third-party verification is not required. The central bank's digital currency is an alternative to cash and will also reflect these characteristics. "In the case of anonymity, I went to the breakfast booth to buy things and pay with Alipay. Because it is a real-name account, my information is left. But if I pay in cash, the boss receives my money, but I don't know who I am. Zhou Sha said that the central bank's digital currency should be consistent with the anonymity of cash, but at the same time it must guarantee "three anti-", that is, anti-money laundering, anti-tax evasion, anti-terrorism financing.

Mu Changchun recently talked about how the legal digital currency guarantees "three oppositions" and said that these tasks can be solved by means of big data.

"That is, although ordinary transactions are anonymous, if we use big data to identify some behavioral characteristics, we can still lock the person's true identity."

Zhang Zhijun, chief information security architect at the World Bank, said in an interview with the Economic Information Daily that electronic payments are common in China, but the privacy of users is currently not protected. If the central bank's digital currency can protect the privacy of users, it will become the first choice for many people in the daily application of micropayments.

Technical "horse racing" business organizations are eager to try

For digital currencies, commercial organizations and the public have different concerns: the latter is curious about how the payment experience will be different. The former is more concerned about the “no pre-set technical route” made by the central bank, trying to capture the participation in the legal digital currency. Opportunities for research and development and even operations.

In public perception, digital currency is often tied to blockchain technology. However, according to the statement of the central bank, the central bank does not presuppose the technical route in the process of promoting the legal digital currency, which means that it does not necessarily depend on a certain technical route. The blockchain is just one of the underlying technologies of the central bank's digital currency alternative.

"We will adhere to centralized management, do not presuppose technical routes in research and development, and can compete in the market for fair competition. We can consider blockchain technology or adopt new ones based on existing electronic payments. Technology, fully mobilize the enthusiasm and creativity of the market, we have also established a mechanism compatible with the incentives of market institutions." Yi Gang said at the press conference on the 24th.

“Like the promotion of POS cash registers across the country, this is a big project. If we adopt a holistic approach that allows many private organizations to participate in the construction of this ecosystem, then the country needs to develop appropriate technical standards and In compliance with the requirements, participants must meet these requirements before they can enter the market. If the work is done well and the legal digital currency is just replacing cash, the financial risk it brings should be relatively small." Zhang Zhijun said.

As mentioned above, the central bank encourages technology “horse racing”, market competition is preferred, and the bottom line and standards are also defined. Mu Changchun said, "Any kind of technical route, the central bank can adapt, the premise is that your technical route must meet certain thresholds, such as at least to meet high concurrent demand, at least 300,000 pens / second." Mu Changchun said that such The threshold requirement is to meet the high concurrency performance required by retail.

Zhang Zhijun said that the standard of 300,000 pens per second of concurrency should be said to be quite high. He said that such a high speed general blockchain technology can not be achieved, because the blockchain needs to pass a consensus mechanism to record transactions into the books. Consensus takes time, so it is necessary to sacrifice speed in order to reach consensus. Some consensus algorithms in the coalition chain can reach thousands of transactions per second. Such a high speed of 300,000 per second is either a centralized solution or a relatively unique distributed ledger technology that is likely to approach such a large capacity.

Zhou Xiaochuan, former president of the People's Bank of China and president of the China Finance Association, also said in a special lecture at the Wudaokou Finance College of Tsinghua University in May this year that the blockchain did not achieve a sufficiently large number of transactions per second (TPS) at the speed of imagination. It is far from supporting the payment system of retail transactions, but it can be used for piloting small-scale financial market transactions or other applications. It is understood that the blockchain currently being promoted by the People's Bank of China is used in two low TPS trading markets: one is a ticket transaction and the other is a letter of credit financing transaction.

The central bank did not publish a complete white paper on the operation plan of the digital currency. Some technical details are not known, but the reporter found in the interview that some private organizations with technical research and development capabilities have a high participation enthusiasm.

“I think that in the second layer of the central bank – commercial banking structure, the commercial banking sector, the private sector has the opportunity to participate.” Zhou Sha said that the general blockchain technology can not meet the relevant technical requirements, but in the blockchain Building some structures on the basis of technology, it is possible to meet the requirements of the central bank's concurrency.

Real landing is not that simple

The introduction of legal digital currency is unstoppable. It is an inevitable outcome of the development of digital technology and also meets the needs of the internationalization of the RMB. However, the landing can not be rushed. On the balance between change and tradition, innovation and security, the “digital renminbi” that “calls out” needs more time to prepare.

Shao Fujun, chairman of China UnionPay Co., Ltd., said that the statutory digital currency of the central bank will have a huge positive impact: first, to improve the efficiency of currency operation monitoring and enrich the monetary policy; second, to improve the intelligence level of the transaction process; The third is to effectively improve the efficiency of payments, especially cross-border payments, and establish an open payment environment.

The external pressure on China’s “cash change” stems from the fact that many central banks, including the Bank of England, the Bank of Canada and the Swedish central bank, are working on the development of legal digital currencies, while some commercial giants are accelerating the launch of cryptocurrencies. .

In June, social networking giant Facebook published a white paper on its virtual currency Libra project. According to the white paper, this cryptocurrency, which is anchored to a basket of currencies and promised to be exchanged 1:1 with fiat currency, is intended to be issued by Facebook with 2.7 billion users. Giants in different fields such as Visa, MasterCard and Uber will support it. It said that the payment scale will reach nearly 700 billion US dollars. In August, the US Patent and Trademark Office disclosed documents that retail giant Wal-Mart is applying for digital cryptocurrency patents. Although the cryptocurrency of these commercial organizations is still very difficult to settle in the short term, it has caused tensions in global central banks.

"More and more people think that one of the root causes of global economic problems is the dollar hegemony. There is a voice in the world that uses an official super-sovereign currency (such as the IMF's eSDR) to counter the dollar hegemony, and some unofficial Institutional companies, such as Facebook's Libra, have seized the market space after the weakening of the US hegemony." Zhou Sha said.

The landing of "Digital Renminbi" is obviously not so simple, and it needs to be prepared adequately and meticulously.

Fan Yifei’s article pointed out that the issuance of central bank digital currency by large countries is a complex system engineering. China has a vast territory and a large population. The economic development, resource endowment and population education of different regions vary greatly. In the process of designing and placing (issuing) and circulating central bank digital currency, we must fully consider the diversity faced by system and system design. And complexity.

"Can't be innovative for innovation, the introduction of legal digital currency, the need to build an overall support system, the cost of the public to Chen Yingxin must be carefully calculated." Deloitte Asia Pacific investment management industry partner Qin Yi told reporters that efficiency and The cost calculation should be a comprehensive consideration of the regulator after measuring the relevant gains and losses, explicit and hidden benefits.

"Security" is one of the challenges. Zhang Zhijun said that because the number of units and individuals involved is very large, the security of the various components of the system, especially the digital wallet, will become very important. Qin Yi also said that in the electronic age, personal privacy and data security are the top priorities. The implementation of the EU's GDPR last year and the huge fines imposed by EU and US regulators on Internet giants such as Google and Facebook highlight the importance that European and American regulators attach to personal privacy and data security in the Internet age. "When the People's Bank of China tries to implement digital legal currency, consumer rights protection, especially data security and privacy protection, should also be the highest standard in the world." Qin Yi said.

Wang Yongli, the former deputy governor of the Bank of China, recently wrote the article "The Challenge of the Central Bank's Digital Money Landing Operation", saying that if it is from the "digital currency exchange mechanism", "the preservation and use of digital currency", "coordinated operation of digital currency and electronic money", etc. Analysis of the details, it may be found that the central bank's digital currency is still running a big challenge.

As Yi Gang said, “There will be a series of research, testing, piloting, evaluation and risk prevention”. The “Economic Information Daily” reporter has previously learned that the statutory digital currency will be piloted in the early stage or in some scenarios, until more mature. Further promotion, from a sound perspective, will be a design for the pilot exit mechanism.

Zhou Sha believes that RMB cross-border payment and cross-border e-commerce may be a trial scenario because “this is urgent, and it is possible to try to push the RMB in some countries along the “Belt and Road” and some countries with unstable currency values. Stabilizing coins."

□ Economic Information Daily reporter Zhang Mo Zhang Xiaojie reported in Beijing

Source: Economic Reference