He Ping, Renmin University of China: The statutory digital currency of the central bank may crowd out some of the quotas used by banks for loans and create deposit currency

According to the China Business Daily, He Ping, School of Finance, Renmin University of China, told reporters that China's proposed legal digital currency scheme intends to adopt a decentralized circulation model. Under the decentralized currency circulation model, the central bank entrusts commercial banks or payment agencies to manage personal digital currency accounts. Currency transfers between individuals are automatically performed using alliance blockchain technology. The main responsibility of commercial banks or payment institutions is to maintain The operation of the system. The quantity and pace of central bank digital currency issuance is directly controlled by the central bank. With constant demand for cash and coins, the issuance of new types of central bank statutory digital currencies may crowd out some of the quotas that some banks use for loans and create deposit currency. Due to the reduction of these loans, banks will naturally reduce their interest income accordingly. For the holders of legal digital currency, if the bank account deposits or savings are exchanged, the bank also loses the savings interest accordingly.