Author: Yao ago
Based on the bottom-up "exchange" perspective, this article proposes a new central bank digital currency implementation plan, which also achieves the goal of "centralized management and control and distributed operations."
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Blockchain is a trusted technology that originated in Bitcoin but surpassed it. Blockchain technology innovation has not only spawned various private digital currencies, but also aroused widespread interest and exploration of central banks in various countries. It can be said that the current Central Bank Digital Currency (CBDC) experiments in most countries are based on blockchain technology. But to this day, whether CBDC adopts blockchain technology is still controversial. A typical view is that the decentralization of blockchain conflicts with the central bank's centralized management, so CBDC is not recommended to adopt this technology. The author believes that blockchain technology is developing at an unprecedented speed and is deeply integrated with various mainstream technologies. Therefore, from a technical perspective or a business perspective, the actual application of blockchain is in accordance with the understanding of "fundamentalism" Different. How to use blockchain technology to better serve the distributed operations under centralized management may be the direction that CBDC needs to focus on. This article takes three typical scenarios as examples to discuss the possible applications and solutions of blockchain in CBDC. It is pointed out that although the technical characteristics of blockchain are not dependent on central institutions, it does not mean that they cannot be incorporated into existing central institutions. Within the system, as long as it is properly designed, the central bank can precisely use the blockchain to effectively integrate distributed operations and better achieve centralized control of CBDC. There is no inevitable conflict between the two.
Scenario 1: CBDC money detector
The author once proposed the central bank digital currency system of "one currency, two banks, and three centers". "One currency" is the central bank's digital currency, which is an encrypted digital string that is guaranteed and signed by the central bank and represents a specific amount. "Two banks" refers to the digital currency issuance bank and the digital currency commercial bank bank. The former is the database where the central bank deposits the CBDC issuance funds on the CBDC private cloud, which is managed in accordance with the central bank's cash operation management system, and the latter is the commercial bank where CBDC The database can be in the data center of the commercial bank or on the CBDC private cloud, following the commercial bank cash operation management specifications. The "three centers" include certification centers, registration centers, and big data analysis centers.
Among them, the registration center records the CBDC and the corresponding user identity, completes the ownership registration, and records the flow of water, and completes the registration of the entire process of CBDC production, circulation, inventory verification and extinction. Its main functional components are divided into several parts: issuance registration, right confirmation release, right confirmation query website application, and distributed ledger service. Issuance registration carries out the issuance, circulation, withdrawal process and ownership records of CBDC; confirms the right to release and releases the registered ownership information asynchronously to the CBDC definite authority distributed account book after desensitization; the authority inquiry website relies on the distributed account book The public provides online ownership query services; distributed ledger services ensure the consistency of CBDC ownership information between central banks and commercial banks.
Generally speaking, it can be understood that we use the non-tamperable and non-forgeable characteristics of the distributed ledger in the registration center to build an "online currency detector", that is, the CBDC confirmation account book, and provide query services through the Internet to the outside world. This design provides a clever application idea for the current distributed ledger technology in the centralized and decentralized binary model of central banks and commercial banks. On the one hand, it isolates the core issuance and registration books from the outside world. Protection, while taking advantage of the distributed ledger to improve the security and credibility of the right to query data and the system; on the other hand, because the distributed ledger is only used to provide external query access, transaction processing is still completed by the issuance registration system. The distributed computing processing of transactions is carried out in the manner of refining the atomic transaction granularity, so that the technical performance bottleneck of the existing distributed ledger in transaction processing can be effectively avoided through the way of business design. Obviously, such a design has fully utilized the technical advantages of the blockchain to ensure the credibility of CBDC banknote verification, but it has not affected the central bank ’s overall control of CBDC.
In particular, this dual ledger inclusive design not only continues the maturity and stability of traditional technologies, but also leaves room for new distributed ledger technologies, making the two distributed technologies compatible, parallel, complementary, and evolving. In the process, competition chooses the best.
Scenario 2: Wholesale payment settlement
The CBDC experiments currently being carried out in various countries are mainly aimed at wholesale-end scenarios, and are mostly based on blockchain technology. For example, the Jasper project in Canada experimented with a large-scale payment system based on blockchain technology; the Ubin project in Singapore evaluated the effect of payment settlement in the form of digital SGD tokens on a distributed ledger; the European Central Bank and the Bank of Japan ’s The Stella project aims to study the application of distributed ledger technology (DLT) in the financial market infrastructure and assess whether the specific functions of the existing payment system can operate safely and efficiently in the DLT environment. In addition, the LionRock project in Hong Kong, China, and the Inthanon project in Thailand are all experimenting with CBDC based on blockchain technology. The application of these blockchain technologies is under the centralized management and strict control of the central bank.
Take the Ubin project in Singapore as an example. It uses the same Digital Deposit Receipt (DDR) model as the Jasper project in Canada. In order to support the issuance of DDR in distributed ledgers, the existing Singapore Electronic Payment System (MEPS +), also known as Singapore ’s RTGS system, specializes in the establishment of a DDR fund mortgage account. At the beginning of each day, participating banks request the Central Bank to close their RTGS account The funds in are transferred to the DDR fund mortgage account as a mortgage, and the distributed ledger creates the corresponding equivalent DDR and sends it to the DDR wallet of each bank, so that the participating banks can carry out transfer and payment based on the distributed ledger. At the end of the day, the distributed ledger system will send a network settlement file to MEPS +, and MEPS + adjusts the balance of the DDR fund mortgage account accordingly to match the DDR balance of participants in the DLT network.
It can be seen that the decentralized distributed ledger and the existing mature central-led financial infrastructure are not exclusive, and can be integrated with each other and complement each other. On the one hand, the blockchain-based DDR payment system provides the existing RTGS system with a new payment method that does not rely on traditional accounts, effectively supplementing the existing payment settlement system. On the other hand, DDR is an extension of the digitalized form of electronic fiat currency in RTGS, which can eventually be converted back to the value of the RTGS account and settled externally through the RTGS system. The settlement finality issue also shows that the settlement finality of the blockchain can be organically integrated into the existing settlement and settlement system. In addition, because DDR is generated through 100% fund collateral, it does not affect the money supply, so the distributed ledger will not affect the central bank's total currency control.
Obviously, in terms of technical logic, the new payment system based on blockchain led by the central bank is completely feasible. In a sense, referring to the digital depository receipt model of the Ubin project, it is possible to eliminate the need for intermediate channels such as networked payment platforms, and various payment institutions and commercial banks can build peer-to-peer networks in financial private networks to The unified blockchain network is connected to carry out payment and clearing. Considering that the transaction performance of the current blockchain technology is still evolving, the above clearing business should be launched at the wholesale level.
It should be said that the decentralization of blockchain refers to deintermediation, but not supervision. In the context of the alliance chain, regulatory agencies such as central banks can not only centrally control and control the business and risks carried by the blockchain, but also implement penetrating off-site supervision.
Scenario 3: Digitalization of cash
It seems that the digitization of cash and the digitization of reserves (that is, the aforementioned digital depositary receipts) are not essentially different, only that the former is for the public, while the latter is limited to inter-bank circulation, but facing the public raises a problem. Allowing the public to open an account with the Central Bank, the Central Bank will face great service pressure, and may cause the deposit to move, resulting in a narrow bank.
One solution is the 100% reserve requirement model. The agency agency deposits 100% of the reserve fund with the central bank, and then issues the corresponding amount of digital currency on its account book as the central bank digital currency. IMF economists call it synthetic central bank digital currency (sCBDC). Accordingly, after 100% of the reserve funds of third-party payment institutions in China are deposited with the central bank, the funds in their virtual accounts are the central bank's digital currency. If this is the case, then China has long been the world's first big country to realize fiat currency digitization.
However, after careful consideration, this idea has flaws: First, technically, 100% reserve deposit and withdrawal means that the full life cycle of digital currency issuance, circulation, and withdrawal must be attached to the traditional account system, especially the cross-institution CBDC Circulation, in addition to the CBDC account book update, but also to deal with the clearing between the corresponding reserve accounts, can only sacrifice system flexibility and limit the amount of control to deal with, and also need to set up a special clearing organization to provide interconnection and interworking services. This not only increases the pressure and complexity of the central bank's central system, that is to say, it still does not solve the central bank's service pressure, and it is difficult to achieve the requirement of "account loose coupling"; second, management, the central bank and operating agencies in this way The issuance and circulation process is tightly bound, and the central bank still bears the pressure of centralization. How to ensure that the agency operating agency does not over-issue currency after 100% of the reserve is prepared, especially when the payment network operated by the agency operating agency is not under centralized control, it is more difficult for the central bank to control the currency issuance of the operating agency layer. To a certain extent, it also constitutes some reasons for opposing the application of blockchain technology to CBDC.
The perspective determines the way of thinking. If you look at it from another angle, you will get another completely different and better solution. Now referring to CBDC, many people understand the technical logic of CBDC from top to bottom, from central bank issuance to commercial banks, and then from commercial bank issuance to personal perspective, so there is always a worry about messing up invoices. Physical currency is subject to the printing and making of coins, but it is not necessary, but the "printing and making of coins" of digital currencies can be completed in an instant without such restrictions, and this is its advantage. If you look at it from a bottom-up perspective, you can be surprised to find that the end user of digital currency does not have the concept of "issuance", but the concept of "exchange", which is how much cash in hand and how many deposits to exchange for CBDC. Therefore, from this perspective, the problem of invoices is not so prominent. The CBDC exchanged by the agency operating agency is not the currency issuance quota given by the central bank, but the result of users using real real gold and silver to exchange in equal amounts. The central bank only statistics and supervises relevant information from a global perspective. In fact, no matter whether it is a private stable token or a CBDC developed by various countries, it is an idea of on-demand exchange, rather than the expansion of table issuance, which is a very critical point. This is of great significance to monetary policy, which shows that there is no fundamental change; for the technical route, it means that you can not stick to the issuance process of physical currency, and the system design can be more concise, so the situation is greatly improved. .
Based on the bottom-up exchange perspective, a simplified version of CBDC can be proposed. The specific idea is: the business is initiated by the bottom customer, and the customer applies for redemption of CBDC and escrows it to the agency operating agency. The agency operating agency records the client's custody of the CBDC's ledger, and establishes a separate ledger for each custodian customer. After receiving the client's request to redeem and custody CBDC, the agent operating agency will record the equivalent amount of CBDC in the client's account while collecting cash or deducting the client's deposit, and then return the cash or deduct the deposit reserve to the central bank, and Mixed and custody to the central bank in batches. The central bank records the total ledger of the agency's operating agency, which is a concept of total amount, and constitutes a two-level double ledger structure with the detailed ledger of the agency's operating agency. When a CBDC payment occurs between customers of the same agency operating agency, it is only necessary to change the ownership on the detailed ledger of the agency, without changing the central bank's general ledger. When a cross-agent operating agency's CBDC payment occurs, the relevant agency operating agency will first process it interactively to complete the change of ownership of CBDC on their respective ledger, and then the central bank will periodically change the general ledger of each agency on the general ledger. In order to improve efficiency and reduce risks, we can consider introducing mechanisms such as continuous net position adjustment and liquidity savings (LSM).
This scheme has the following advantages: First, it is clear that the holder has full control over CBDC. Without the signature or consent of the holder, no other subject can use CBDC. This makes CBDC truly possess cash properties, which are fundamentally different from deposit currencies. Second, the central bank does not create separate files for the bottom customers, that is to say, the general public does not “open accounts” at the central bank, reducing the service pressure of the central bank, and at the same time truly fulfilling the requirement of “account loose coupling”. The CBDC system is relatively independent of the RTGS system. Third, each agency operating agency can build on its own expertise and build on its own expertise to build its own digital currency agency operating system based on its own understanding, which is conducive to competition and easy for customers to choose. Because it is on-demand exchange, rather than extended watch issuance, there is no worry of over-issuing currency at the operating agent level. In addition, although the bottom customer transaction information is only stored in the middle layer and not stored in the central bank's ledger, for policy or regulatory needs, the central bank has the right to extract the details of the information to the next level of agency operation agencies, so as to operate in a distributed Under the conditions, centralized management and control have been realized.
As an emerging technology that may become the financial infrastructure of the future, blockchain is helpful to the realization of distributed operations for the central bank and commercial bank binary model, and does not affect centralized management. This article further demonstrates that the decentralized features of blockchain technology can be incorporated into CBDC's distributed operation and central bank's centralized management system through three typical scenarios. Blockchain technology can be applied to the CBDC's registration account to verify the CBDC's banknotes and guarantee credibility. In the wholesale scenario, experiments conducted by various countries have also shown that CBDC and payment systems based on blockchain technology are feasible. In the digital cash retail scenario, this article believes that the reason why the current CBDC research and development program has not been able to give full play to the advantages of distributed operations under the control of the central bank, the problem lies in the top-down "issuance" perspective. From the bottom-up "exchange" perspective, a new CBDC implementation plan is proposed, which also achieves the goals of "centralized management and control and distributed operations".
"Things are things but not things", "the metaphysical is the Tao, the metaphysical is the weapon, and the Tao is the weapon". This is the thought of ancient Chinese philosophers. Centralized management and distributed processing have always required a dialectical and unified view, and it is not appropriate to "preemptively" put the system-level centralized control and the technical-level distributed processing in simple opposition. At present, the central bank digital currency experiments based on blockchain technology in various countries are progressing rapidly, and the content has covered a wide range of topics such as privacy protection, data security, transaction performance, identity authentication, coupon payment, and payment payment. As a brand-new technology, the blockchain certainly has various shortcomings and shortcomings, but this is not the reason we give up easily. Facebook's Libra project is already developing a new generation of financial infrastructure based on a secure, scalable and reliable blockchain. This is a brand new track where opportunities and challenges coexist. "Going against the current, retreating without advancing." (The author is the director of the Technology Supervision Bureau of the China Securities Regulatory Commission)