On January 15, Yang Fan, a member of the central bank's blockchain financial expert group and co-chairman of the Zhongguancun Blockchain Security Research Institute, delivered a keynote speech entitled "Global Digital Currency Game Framework and Development Trends." Yang Fan shared many thoughts on the global digital currency game, but he especially emphasized that these thoughts are purely academic discussions, not the official views of the central bank :
1. The central bank's digital currency policy directly affects enterprises and individuals, the currency multiplier factor of commercial banks will disappear, and the commercial banking system will also shrink, reducing to investment and financial institutions or commercial lending institutions. Who does the central bank issue digital currency, especially the People's Bank of China issues digital currency M0?
2. Which one of administrative supervision and market self-regulation is more effective? Libra has been unable to get out of this vortex. The core reason is that people have always used centralized thinking and centralized supervision to view the blockchain, digital currencies, and the digital economy. Libra is just a vanguard. In the future, whether it is the digital currency of the central bank or the private digital currency, it will face the same problem.
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3． Whether it is a legal digital currency endorsed by a sovereign, a private digital currency endorsed by a private institution, or an autonomous digital currency endorsed by an algorithm, it will face more equal competition than the real world. If any digital currency cannot meet the digital world and its users, The specific needs of digital currencies are likely to be abandoned or be disadvantaged.
4. Digital currencies are issued by computer algorithms and are issued by algorithms, such as Bitcoin. So the legal currency issued by the big country has to decide by the algorithm and the model? After the dollar is decoupled from gold, is the dollar still a physical currency? Is it virtual currency?
5. Currency issuance is not the exclusive power of the central bank. Who can implement online and offline simultaneous applications to the greatest extent? Who can maximize the convenience and security of transactions? Regardless of fiat currency or folk digital currency, the digital currency trading system implemented by the peer-to-peer technology accepted by the public and the market can really have a strong vitality. The following is the actual record of Yang Fan's speech, which was released by Babbitt based on the shorthand and PPT.
Global digital currency equilibrium pattern
During the financial crisis period, people expect new breakthroughs in financial currencies, and more strongly expect digital currencies to stabilize. Therefore, the stablecoin has been relatively strong in the past two years. In particular, the very cautious European Central Bank has completely changed its attitude and released a project based on the POC called the EURO chain.
According to statistics, there are currently more than 200 fiat currencies and more than 9,000 illegal currencies in the world. The equilibrium ratio between fiat currencies and illegal currencies is 2.5%. The central bank and non-central bank digital currency balance ratio is 0.13%, which means that the digital currency issued by 38 countries (currently only 20 countries intend to issue) digital currency can reach the 2.5% equilibrium ratio.
China, the European Union, and the United States have basically formed an equilibrium pattern, and their views and attitudes towards the future digital economy and digital finance are converging. Europe mainly focuses on the B-side (enterprise), and China focuses on the C-side (ordinary people). The European Central Bank's EURO chain and the People's Bank of China's DC / EP are close in content, while the Fed and Libra have closer views.
A super hotspot has just formed-central bank digital currency
The big game framework of fiat and illegal currency was first started by Bitcoin. Before Libra, Bitcoin had a big impact on the world, but there was not much shock for governments and central banks. The launch of Facebook's Libra in 2019 has actually caused fear among central banks around the world, as 2.7 billion users and their services are enough to shake the foundations of the operation of any central bank and its fiat currency. As a result, 2020 is called the "first year of central bank digital currency", and the era of the big game of fiat and illegal currency is coming!
What is the purpose of the central bank to issue digital currencies? Sheng Songcheng previously stated: "Private digital currency uses a series of new technologies, which have a strong penetration of the financial system and even have an impact on modern economic and financial operations. Therefore, in order to maintain the stability of the monetary system and the entire financial system, Monetary authorities must also use the same or even more advanced technologies and designs to study central bank digital currencies. If private digital currencies are allowed to grow out of order, this will have a serious impact on monetary authority policy regulation and the economic and financial system. "
In other words, until now, the central bank has issued more “forced issuance” of digital currency. In addition, the sharp reduction in cash is another positive factor for the central bank to issue digital currencies.
The central bank's digital currency game framework is not yet complete
The game framework of the central bank's digital currency is generally incomplete. Mainly reflected in 4 points game:
1. Monetary policy game: Civil digital currencies further weaken the status of fiat currencies and weaken the role of monetary policy regulation, which is actually very detrimental to the stability of economic development. What options are provided for monetary policy? Does the central bank's digital currency serve the national monetary policy, or is it a global monetary policy, or is it a game of pure monetary stability policy?
2. Statutory and private digital currencies are virtual currencies, and they are different algorithms. Digital currencies are issued by computer algorithms and are issued by algorithms. Private currencies such as bitcoin are not left to the central bank, and are ultimately determined by the community. Never mind. When the US Federal Reserve issues US dollars, the fiat currencies issued by the major powers cannot be calculated by the algorithm or by the model? After the disintegration of the Bretton Woods system and the decoupling of the US dollar from gold, is the US dollar still a real currency? Is it virtual currency? Can the algorithms that create digital currencies stabilize the value of fiat currencies?
3. The digital currency / central bank and commercial bank interaction game: the monetary policy of the central bank will directly affect enterprises and individuals, the currency multiplier factor of commercial banks will disappear, and the commercial banking system will also shrink, reducing to investment and financial institutions or businesses Lending institutions. Who does the central bank issue digital currency, especially the People's Bank of China issues digital currency M0?
4. The game of who is directly responsible for risk: systemic financial risk, stability, and consumer protection. Who will be directly responsible for the resulting risk or systemic risk?
So far, although the central banks of various countries have expressed interest in digital currencies, no legal digital currency of absolute significance has yet appeared. None of the People's Bank of China officials has publicly announced to the world that the central bank's digital currency must be issued within a certain period of time and how it must be issued.
Design considerations of the People's Bank of China for digital currencies
Let me talk about the design considerations of the digital currency of the People's Bank of China, first of all, the two-tier payment system. The central bank is the bank of a commercial bank. This two-tier system is the epitome of an account-based currency system. It can be transferred without an account. It is an advantage for individuals and a disadvantage for central banks. Regarding the two-tier launch and two-tier operation structure, I don't want to elaborate on the technical architecture. I just want to ask, if the central bank does M0, can it better grasp the specific processes and links of payment in the market than commercial banks? I came from the central bank and I have done it in commercial banks. I know the central bank can't do it, but commercial banks can do it.
Secondly, with whom does digital currency issued by China compete? Is the international currency development strategy positioning accurate? In the current market, various electronic currencies, including Alipay and WeChat Pay, are greatly eroding our cash. At present, the digital replacement of bills (M0 replacement) only accounts for 8% of the currency in circulation. Who is the central bank competing with to do this? China has ranked first in the world in international trade for three consecutive years, but the RMB delivery volume and transaction volume did not exceed 2% in foreign payments. The digital currency issuance strategy should be positioned for RMB internationalization, not domestic M0 competition.
Finally, digital currencies are divided into wholesale and general-purpose CBDC. Alipay is an electronic currency. Allowing Alipay to participate is equivalent to the central bank's intention to establish a "composite digital currency CBDC" to provide Alipay with settlement services and reserve services for the central bank. Our central bank is a synthetic digital currency that has both wholesale and retail.
In 2016, the Bank of England's earliest research and development of a centralized digital currency, RSCoin, failed without success. I may not study this question deeply and grasp it inaccurately. I hope to ask some questions, even if the questions I asked are not correct. I hope that the digital currency we issue in the future will not fail.
Non-Fiat Currency Defects and Its Regulatory Equilibrium Framework
Regarding non-statutory currency deficiencies and the regulatory framework, I will only talk about which one of administrative supervision and market self-regulation is more effective? Libra has been unable to get out of this vortex. What is the core reason? It is people who have always used centralized thinking and centralized supervision to look at blockchain, digital currency, and digital economy. Libra is just a vanguard. In the future, whether it is the digital currency of the central bank or the private digital currency, it will face the same problem. One regulatory official said that because it was decentralized, it would never succeed. But decentralized thinking and regulation must be at the core.
Whether it is a legal digital currency endorsed by a sovereign, a private digital currency endorsed by a private institution, or an autonomous digital currency endorsed by an algorithm, it will face more equal competition than the real world. If any kind of digital currency cannot meet the digital world and its users against digital The specific needs of money are likely to be abandoned or be disadvantaged.
Digital currency game and equilibrium status
What does the digital currency game and equilibrium present mean? The game between virtual and entity, the game between token and currency, the game between currency and non-money, the game between digital currency and non-digital currency, the game between fiat currency and illegal currency, these issues deserve our financial research. The problems have emerged, now Academics need to deepen their research. Only in this way can real digital finance and digital currencies move towards a healthy development path.
Lagarde believes that it may be unwise to refuse to accept virtual currencies. She expects that some economies may use more virtual currencies and set off a "USD 2.0"; virtual currencies may subvert traditional banking services and central bank supervision models. Virtual currencies do not currently threaten fiat currencies and central banks, but they may overcome many current technical challenges in the future. They may be more convenient and stable than some currency issuances, and they are more popular as payment methods, which may force the central bank to expand the scope of supervision.
"Dollarization 2.0", why do nationals of some countries prefer to hold virtual currencies instead of real fiat currencies such as US dollars, euros or pounds? Virtual currency may be easier, more secure, and more stable than paper currency. It may be issued 1: 1 against the U.S. dollar or a stable basket of currencies. The issue may be completely transparent, reliable and preset responsible management, and monitored by program algorithms. There may even be a set of smart rules that reflect changes in the macroeconomic environment.
Of course, the outcome of the game is whether the system, mechanism, rules, model, or technology wins. China, the United States, the European Union, and other countries all have different strengths.
Several key issues that need to be reconsidered
"The stage of product value scale, metal value scale, fiat currency scale and so on of the construction of the human civilization community and the human financial and monetary community" was proposed by Hayek, and many people opposed it. I can't say that Hayek must be right, but at least he has opened up a new space for us to allow us to consider the future development of digital currencies from a decentralized perspective, including legal and illegal digital currencies. Global equilibrium and games.
Countries around the world must weigh the pros and cons of central bank digital currencies according to the actual situation. This is not my point of view, but the point of view of the International Monetary Digital Fund. I will not repeat the content of the following picture.
Credit Equilibrium of Issuers of Digital Currency
"The folk digital currency is difficult to solve the problem of trust, so it cannot be widely used. If the folk digital currency is generated through an algorithm, there is no issuer of the central bank, it is through an algorithm, who maintains the folk digital currency Stability, what is the source of its value, this is very questionable. "Wang Xin pointed out.
However, I believe that the key to whether credit is stable and reliable lies in the desire to expand the control of credit leverage. We must make sure that all are the main players in market transactions. Who is the major credit risk? Who is young What are the particularities and differences between digital currency and ordinary currency? National credit may not be the most ideal currency support, and some countries are even less trustworthy than businesses or private individuals.
The top-down systemic financial risks of the central bank, and the private bottom-up part of the digital currency equilibrium choice that can be gradually grasped and not grasped, are the only way for future global digital currency norms and risk equilibrium, and also our choice.
So far, the technology of all central banks in the world on digital currencies is still immature, because of the restrictions and restrictions on the frequency of transactions by blockchain technology. In the current market, regardless of whether it is a legal digital currency or an illegal digital currency, or even other applications in the market, it is basically a partial-chain, some non-chain, multi-chain, side-chain model. Digital assets and digital currencies are inherently free, and they are constantly playing and balancing in global liquidity and risk. This way of grasping the risk is worth pondering, and may depart from the essence of blockchain security.
Currency issuance is not the exclusive power of the central bank. I believe that digital currencies should not be issued by the central bank alone. Who can achieve the largest range of online and offline synchronization applications? Who can maximize the convenience and security of transactions? Regardless of fiat currency or private digital currency, the digital currency trading system implemented by the peer-to-peer technology accepted by the public and the market can really have a strong vitality. Its application in the financial industry will trigger a subversive reconstruction of the entire financial operation and economic operation model .
This article is the content of Yang Fan's speech at the "Break the Boundary • Fusion Blockchain and Digital Finance Summit Forum" hosted by eBay Finance, a blockchain, and Financial Finance magazine, organized and released by Babbitt.