The central bank's digital currency DCEP is about to be piloted. What can it bring us?

Recently, the People's Bank of China held a 2020 working meeting, at which the central bank pointed out that in strengthening the development and application of fintech, it emphasized the need to continue to promote the development of digital currencies. The deputy governor of the central bank said a few days ago that the central bank's digital currency DCEP is adhering to the work of double-layer investment, standard formulation, function research and development, and joint testing. The next step is to follow the principles of stability, security, and controllability, reasonably select pilot verification regions, scenarios, and service scopes, continuously optimize DCEP functions, and steadily promote the introduction and application of digital forms of fiat currencies.

In the "Inventory of Bank of China 2019 Fintech", the central bank also stated that it has basically completed the top-level design of legal digital currency, standard formulation, function research and development, and collaboration under the premise of adhering to double-layer operation, M0 (banknote and coin) substitution, and anonymity. Test and other tasks. Carry out solid research on digital currency, and track and study the international frontier information of digital currency.

It is reported that 2020 will be a year of comprehensive development of the central bank's digital currency.

In this regard, first talk about the current situation and the importance of issuing DCEP:

1. At present, the US dollar is the only currency linked to gold, so its importance is self-evident, and the status of the US dollar has consolidated the US superpower and hegemonism.

As the second-ranked currency in the world, the euro was once regarded as a strong enemy of the US dollar, but the European Union is composed of many countries, and it is doomed that the euro cannot really compete with the dollar.

However, with the development of our country, and China is the world ’s most populous country, China ’s renminbi has become the largest contender for the US dollar. In addition, Facebook, which has a strong audience, intends to launch Libra, which is also a new challenger for the US dollar. The importance of launching digital currency in China today is self-evident.

2. In addition, today is a fast-paced world, and the success of Alipay and WeChat Pay also illustrates this. Therefore, the introduction of fiat digital currencies by the central bank can facilitate the convenience of domestic payments.

In addition, the Global Banking Financial Telecommunications Association is also an international settlement network with the US dollar as the main body. If the United States excludes China from this association, it will cause great losses to China. Although this is not good for the United States, it is not wrong in case.

3. Currency diversification is the general trend and cannot be changed.

4. Libra is also constantly adjusting its strategy. If it wants to go public, it must be questioned by Congress, but the United States will not let it appear so easily. The most likely way to go public is to combine the US dollar with it. This will strengthen the US dollar ’s leadership in the world, which is not good for international development. Therefore, the introduction of digital currencies in China will help obstruct the United States. .

Next, we will briefly explain the positioning of digital currencies.

Regarding the positioning of DCEP, the central bank said a few days ago that it is not a simple substitute for paper money, but rather to replace cash in circulation, that is, the sum of the cash on hand of all units outside the banking system and the cash held by residents. DCEP is also different from Alipay in that it does not need to be bound to any bank card.

DCEP has a two-tier operating system. The first layer is the People's Bank of China to commercial banks, and the other layer is commercial banks or commercial institutions to citizens. In other words, when the DCEP is issued, the People ’s Bank of China first issues the DCEP to the commercial bank ’s business bank, and the commercial bank then provides DCEP access and circulation services to the public. In this way, commercial banks will work with the People's Bank of China to maintain the normal operation of digital currencies.

And, DCEP also has an important feature that it can pay offline! In other words, you can also transfer money when the network is disconnected. This is not possible with Alipay or WeChat. This can greatly avoid the embarrassment of the poor network status and the failure to load the payment page, or Sudden disconnection but want to buy conflict.

And what needs to be corrected is that DCEP is not the same concept as Alipay and WeChat. The latter two represent electronic payment, while DCEP is also a direct payment method using deposits in commercial banks.

DCEP is centralized!

It should be noted that DCEP is a sovereign credit currency, which means that DCEP is different from virtual price currencies such as Bitcoin and Libra, and it is different from the "currency non-state" idea.

Virtual currencies such as Bitcoin are more like a private currency without a solid credit foundation. However, DCEP has a solid foundation. It is like the paper money in our country, although it has no value, but it can replace the function of currency because it has national credit as the support and is mandatory and legal. Bitcoin lacks a central adjustment mechanism, and it is not only difficult to meet the requirements of monetary policy, it is even impossible to maintain the stability of the currency value. The sharp increase and decline of its currency value in recent years have proved this. (So, virtual currencies such as Bitcoin are just investment products)

Then, to put it another way, DCEP's substitute is only paper money, and the substitute for virtual currencies such as Bitcoin can be any item with the same value.

From this perspective, the emergence of DCEP is a good thing for the country and the people, but it cannot be "fried"!

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