Long Baitao | Digital Asset Research Institute Weekly Digital Currency Report (2020/1/5)

Source of this article: CIDA

Author: Long Tao White

The People's Bank of China adjusted its third-party payment reserve policy from no interest, to a quarterly interest rate set by the central bank at 0.35% annual interest rate within three years, but 10% of it was used as industry security. The policy will be implemented from August 1, 2019 to July 31, 2022, and will be adjusted according to the assessment. Industry insiders said that the total reserve funds for the industry are expected to be about 1.17 trillion yuan. Based on the market share of Alipay and WeChat, the reserve funds generated by the two institutions should be about 600 billion yuan and 400 billion yuan, respectively. Calculated at an annualized deposit rate of about 1.265% (up to 10%), after 100% deposit is achieved, the interest income of the payment institution will be reduced by about 14.8 billion yuan. The adjustment of the third-party payment reserve policy reflects the continuous "fine-tuning" of the People's Bank of China's supervision of large technology companies. From the initial increase of the reserve ratio from 20% to 100%, the reserve account will be increased. From the collection of commercial banks to the central bank and the cancellation of interest on reserve funds, interest payments on reserve funds have now been paid. The depth and breadth of China's large-scale technology companies entering the financial services field, as well as the challenges brought by regulation, and the regulatory experience that China has accumulated for large-scale technology companies, are among the best in the world.

The People's Bank of China released its 2020 work outlook saying that "they will continue to steadily advance the development of legal digital currencies." Considering that on the one hand DC / EP as a new form of central bank currency requires more time to fully test to mitigate potential risks, on the other hand DC / EP assumes the responsibility of internally resisting Libra's erosion of RMB sovereignty, and the author is cautiously expected The launch date of DC / EP will be slightly ahead of Libra.

The Bundesbank President and European Central Bank decision maker Jens Weidmann called on banks to introduce a cheaper and faster payment solution in response to Facebook's stablecoin Libra. In an interview with the German newspaper Handelsblatt published on Thursday, Jens Weidmann said that the country cannot always be called for solutions. In a market economy, companies generally provide corresponding solutions to customer needs. The outgoing ECB Executive Board Benoît Cœuré expressed his concerns about the autonomy of the European payment system and the response measures of the European financial elite in a speech on "Retail Payments Towards Tomorrow: A Strategy for Europe" in December 2019 Payment strategy. The core of this strategy is a market-oriented pan-European retail payment solution. Weidmann and Cœuré spoke in the same spirit . Regarding the digital currency that the German central bank is currently trying, Weidmann said that this is actually a payment transaction between the central bank and commercial banks. Specifically, the central bank is testing blockchain technology to supplement centralized account-based solutions, but at present Has not achieved better results. In a speech on "Cash and Digital Currency in the Eyes of the Central Bank" in November 2019, the Bundesbank Executive Committee Johannes Beermann said, "For the economic relationship between households, commercial banks and central banks that have developed to date, the form of retail may mean one This kind of paradigm shift ", and believed that" wholesale form is an improvement on the existing structure, but it has little or no impact on monetary policy. " The expression of "paradigm shift" is euphemistic and artistic. The subtext is that the issuance of retail CBDC destroys commercial banks' business model of "creating money by issuing loans." The current position of the Bundesbank and the European Central Bank is that they can quickly promote wholesale CBDC, but remain vigilant about retail CBDC. The author has repeatedly analyzed the logic of the ECB's position-protecting the existing business models of commercial banks.

Bank of China Deputy Governor Wu Fulin recently commented on Facebook's release of Libra, stating that Libra will pose a challenge to the international monetary system. After the launch of Libra, it will have an impact on electronic payment, monetary policy, financial stability, financial ecology, especially the international monetary system. Without the control of the US government, the launch of Libra will inevitably challenge the status of the US dollar as the main settlement currency. For other major settlement or reserve currencies, such as the euro and yen, after Libra's intervention, its scope of use will also be affected. China should seize the opportunity to promote the development of digital currencies. The first is to increase the emphasis on digital currencies, actively cooperate with international organizations and central banks, track the latest developments in digital currencies such as Libra, and actively seek opportunities to participate in the global governance of digital payments. The second is to carry out the promotion of digital currency in China's central bank as soon as possible, and to conduct technical assessment and calibration of possible loopholes in digital currency in order to gain more voice in the global digital currency field and contribute to the reform of the international monetary system. This speech shows that Chinese banking practitioners are raising their awareness of Libra. Libra "is not controlled by the US government" can only be a good wish. The US Treasury Department and the Federal Reserve have clearly stated that they do not oppose Facebook's release of Libra, and the author also has several articles in-depth analysis that Libra represents the interests of the US dollar. Although the desire to “actively seek opportunities to participate in the global governance of digital payments” is beautiful, the People's Bank of China has not participated in the FSB's ongoing global stablecoin regulatory policy recommendations. The People's Bank of China needs to prepare with two hands. On the one hand, it will strive for China's right to speak under the current international monetary and financial system governance structure (such as the wholesale digital token work being carried out by BIS and the financial stability of large-scale technology companies undertaking FSB Sexual impact and regulatory research, Mu Changchun contributed considerable Chinese cases and experience). On the other hand, DC / EP should be independently used to promote the development of digital currency business and technology in order to create a new space for discourse.