Everbright Securities Peng Wensheng: The first step of the central bank's digital currency may only be the replacement of cash

According to today's news from China Economic Net, Everbright Securities chief economist Peng Wensheng released a column article "Can the central bank digital currency replace WeChat payment and Alipay? ". The article points out that how the central bank's digital currency is put out is a practical issue, and I think the key is whether to pay interest. If you do not pay interest, the central bank's digital currency is only a substitute for cash, this amount will be small, and it is completely the result of trading behavior. In that case, it is estimated that it will be reflected in the change of the central bank's liability side. The increase of central bank digital currency, the decrease of cash in circulation, or the reduction of the bank's reserve in the central bank are reflected in either replacing cash or WeChat payment and Alipay. WeChat Pay, Alipay, and bank accounts are still linked, ultimately reflected in the corresponding reduction in bank reserves in the central bank. But if the central bank's digital currency pays interest, it will be a new type of safe asset, and the demand for individuals and businesses may be relatively large. It is unrealistic to rely solely on the self-digestion and mutual replacement of the debt end of the central bank to keep the size of the entire balance sheet unchanged. The central bank's balance sheet needs to be increased to meet the non-bank sector's demand for central bank digital currencies. If the People's Bank of China becomes the first central bank to issue digital currencies in the world, it may be more cautious and prefer not to pay interest, because the impact of interest payments is too great, including the need to consider how to expand the central bank ’s balance sheet, which involves many Complex public policy issues, especially the relationship between currency and finance, so the first step for a central bank's digital currency may be to replace cash.