(China News Agency)
The research and development of the central bank's legal digital currency will help to innovate the way of currency issuance, circulation and regulation, thereby effectively improving the efficiency of digital economic transactions and reducing the cost of digital economic transactions. The promotion will have a greater impact on the banknotes, and the latter's issuance and use will decline.
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From May 6th to 8th, the 2nd Digital China Construction Summit was held in Fuzhou. The Digital China Construction Development Report (2018) released by the National Network Information Office showed that the scale of China's digital economy reached 31.3 trillion yuan in 2018. It grew by 20.9% compared with last year and accounted for 34.8% of GDP.
Along with the development of cloud computing, big data, artificial intelligence, and industrial Internet, digital transformation has become the main battlefield that drives economic development and economic strategy competition among countries. The development of digital economy has become a global consensus.
According to Accenture's analysis, for every 10% increase in digitization, per capita GDP will increase by 0.5% – 0.62%. Especially in the current global economic growth, the digital economy is seen as a new lever to incite the global economy. It is predicted that the application of digital skills and technology will make the global economy expected to increase by 2 trillion US dollars by 2020; by 2025, half of the global economic value comes from the digital economy.
The development of the digital economy cannot be separated from the promotion of legal digital currency. Yao Qian, former director of the Digital Currency Research Institute of the People's Bank of China, pointed out that the legal digital currency is the cornerstone of the digital economy. He also revealed that the People's Bank of China is currently conducting research and development of central bank digital currency.
Coincidentally, on May 2, local time, the Singapore Monetary Authority and the Bank of Canada issued a joint announcement that the two sides have completed cross-border and cross-currency payment tests for digital currencies. This is the first successful attempt by the two central banks to send digital currency through blockchain technology, marking a new development in international digital currency payment research and development and testing.
According to Lagarde, president of the International Monetary Fund (IMF), providing money for the digital economy may become a national task.
In 2016, the G20 Digital Economy Development and Cooperation Initiative, released at the G20 Hangzhou Summit, clearly defined the digital economy by using digital knowledge and information as key production factors and modern information networks as an important carrier. The effective use of ICT as a series of economic activities that are important drivers of efficiency improvement and economic structure optimization.
At present, the world is experiencing a broader and deeper technological revolution and industrial transformation. The latest digital technologies are accelerating into daily life and playing a more important role in business operations. The driving force for economic growth is becoming more and more obvious. .
According to the China Institute of Information and Communication Research, from 2002 to 2018, the scale of China's digital economy has grown from less than 150 billion yuan to 31 trillion yuan, a 208-fold increase over 16 years, and the annual average compound growth rate has reached 38%, far exceeding GDP over the same period. Speed up.
According to the "China's Digital Economy: Opportunities and Risks" report released by the IMF, China has become a global leader in some important digital industries such as e-commerce and financial technology. China's e-commerce accounts for more than 40% of global transactions. In addition, China has begun to expand its global influence in areas such as payments, cloud computing, and ICT product exports.
Internet, cloud computing, big data, Internet of Things, financial technology and other new digital technologies have changed the way social interactions are used in the collection, storage, analysis and sharing of information. They have also created a reshaping and innovation of monetary forms. condition. The currency form evolved toward the digital currency after going through commodity coins, metal currencies, paper money, and electronic money.
According to the "Financial Times" news on May 8, in recent years, digital currency has become one of the hot spots of the attention of many central banks. Many central banks have also established specialized digital currency research institutions or departments to issue relevant research reports, initiate technology research and development, and explore the regulatory framework or national digital currency needed.
It is worth noting that, unlike most of the digital currencies that people understand, the digital currency issued by the central bank is actually a “digital legal currency”, essentially the same as cash, belonging to the central bank’s liabilities and having national credit.
The well-known virtual currency such as Bitcoin and Ethereum refers to the currency based on blockchain technology (cryptography, encryption algorithm, etc.), also known as cryptocurrency.
Compared with the decentralization and concealment of cryptocurrency, the central bank digital currency (CBDC) is still centrally centralized. Although it also combines blockchain technology, it is fully controlled by the state.
According to media reports, in November 2018, Lagarde called at the Singapore Financial Technology Festival that when the currency faces a "historic turning point", central banks should consider issuing digital currency.
Wang Hao, president of Frost & Sullivan Greater China, told the International Finance News that the central bank’s digital currency will make inter-bank transactions easier, thereby speeding up transactions, reducing transaction costs, and helping to maintain financial payment systems. Security and improved operational efficiency in financial markets. In terms of cross-border payments, the introduction of the central bank's digital currency will replace the current channel of cross-border payments through correspondent banks, reducing the complexity of intermediaries' participation.
Multinational central bank layout digital currency
In the use of research on digital currencies, central banks in some countries have already taken the lead.
According to public information, the People's Bank of China was one of the first central banks to conduct research and experimentation on digital currency. In 2014, a special research group on legal digital currency was established to demonstrate the feasibility of the central bank issuing legal digital currency. Since then, the Chinese central bank has conducted a series of explorations and studies.
According to the news, on October 30, 2018, the Venezuelan Ministry of Economy and Finance announced on its Twitter official account that the oil coins were open for purchase and publicized the official purchase route, accepting the legal currency such as RMB and USD, and Bitcoin and Ethereum. Wait for virtual currency payments.
According to reports, the oil coin is the world's first digital cryptocurrency issued by the Venezuelan government with a national credit endorsement. The currency value is always linked to oil, and 1 oil coin = 1 barrel of oil.
According to the white paper on petroleum coins, the value of oil coins is supported by Venezuelan national resources, of which oil supports 50%, gold supports 20%, iron supports 20%, and diamond assets support 10%. This currency will be used for international payments and become a new way for Venezuela to raise funds internationally.
According to the "Financial Times" report, the Singapore Monetary Authority and the Bank of Canada issued a joint announcement on May 2, the two sides conducted a successful payment test on cross-border and cross-currency payments of encrypted digital currency. The content of the experiment is mainly to improve the potential of cross-border payment efficiency and risk reduction of digital currency.
The international payment for the successful settlement of the two central banks was called the “Jasper-Ubin” project. Specifically, both central banks are experimenting with their own digital currency and distributed ledgers, and adopting a “hash lock contract” to connect Canada's Project Jasper with Singapore's Project Ubin network. The books are connected. In other words, the "hash lock contract" ensures that all payments occur at the right time and in the order. This allows for the clearing of international payments faster than traditional systems and eliminates the need for third parties to act as intermediaries. In general, traditional systems require a third party to act as a middleman to verify the transaction.
On May 8, the Thai central bank's technology partner Wipro announced that the Bank of Thailand is advancing its digital currency project by establishing a blockchain-based prototyping solution that will enable the central bank to be in its eight commercial banking partners. Use a digital currency to settle transactions between.
At the World Bank Group and IMF Spring Joint Meeting held on April 8-12 this year, the Swedish central bank deputy governor Cecilia Skingsley revealed that the Swedish central bank will issue its own digital currency e-krona in the next 10 years. The probability is more than 50%.
According to Cecilia Skingsley, the value of paper money and coins still in circulation in Sweden is currently only 1% of GDP. In contrast, the ratio of the euro zone to Japan is about 10% and 20% respectively. “In Sweden, only 1 in 10 people pay in cash, which makes e-krona's release possible.”
In response, Xiao Lei, an encrypted digital currency analyst, told the International Finance News reporter:
“Nearly no country in the world rejects the technical attempt of digital currency. The reason is that the development of blockchain technology has proved its safety and convenience in the field of money payment. So I think countries are actively involved in the research and development of digital currency. A trend. China is currently making relatively good progress, and blockchain technology has been used in areas such as ticket trading."
Yao Qian also pointed out that the research and development of the central bank's legal digital currency will help to innovate the way of currency issuance, circulation and regulation, thereby effectively improving the efficiency of digital economic transactions and reducing the cost of digital economic transactions.
Xiao Lei believes that the future digital economy needs more secure digital payment means to support it. If we use some controllable decentralization attribute of the blockchain, the official digital currency will actually increase the private credit, the holder will be more secure, the enthusiasm of the transaction and the scalability of the digital economy will increase significantly.
Wang Wei said that in the context of informatization and intelligent development, the popularization of central bank digital currency in the future will continue to promote the continued expansion of the digital economy.
Will not replace banknotes
“New” means that the traditional industry pattern has been broken, and a series of problems and challenges have arisen.
In Wang Wei's view, the central bank's development of digital currency faces many challenges such as the soundness of the regulatory system, the rationalization of interest rate transmission mechanisms, privacy issues, and high operating costs.
Wang Wei told the reporter of International Finance News:
"Due to the continuous development of digital technology and changes in national economic needs, the establishment and gradual improvement of the central bank's digital currency regulatory system will become one of the challenges facing future development. At the same time, because the central bank's digital currency and banknotes have the same economy. The effect of regulation, therefore, how to design a reasonable interest rate transmission mechanism has a significant impact on the transmission effectiveness of monetary policy and the economic development of the country."
“The central bank’s digital currency, as the legal tender, has extremely high requirements for security technology and risk prevention. Since blockchain technology is currently not doing very well in terms of privacy, related transaction records and information are still traceable, so users The problem of privacy leakage may still exist. In addition, digital currency has high operation and maintenance cost due to its large database. Blockchain nodes have high redundancy, which brings great challenges to traditional operation and maintenance methods. Both the technical and the technical aspects are treated accordingly, which requires a relatively large cost." Wang Wei said.
However, with the popularity of electronic payments, the central bank's issuance of digital currency is the general trend.
"In the future, the promotion of central bank digital currency will have a greater impact on banknotes, and the issuance and use of banknotes will decline." Wang Wei said, "With the popularity of the Internet and the development of high technology and Internet of Things, electronic settlement The method is quickly covered on a global scale. Traditional banknotes are becoming more popular due to their difficulty in storage and transfer, low information technology and low security. From the perspective of consumer use, digital currency has become more popular. The central bank's digital currency can reduce the large amount of financial and environmental costs incurred in the issuance, circulation and processing of banknotes. In addition, the central bank's digital currency can largely avoid cash-induced black economy and reduce related costs because of the characteristics of its trackable transaction record information. Criminal offences."
So, will the future digital currency eventually replace banknotes?
In this regard, Xiao Lei believes that from the perspective of China, the overall idea of the central bank's digital currency is to replace the cash in circulation, which is the digitization of a traditional credit currency. However, in the transaction and tracking supervision, blockchain technology can be used. Therefore, it is difficult to form a substitute for the traditional credit currency, and more is a complementary effect.
In Bloomberg's view, if the central bank issues its own digital currency, the value of bitcoin and other cryptocurrencies may be worthless.
◎ Reporter Li Zizi, International Finance News (May 13, 2019, 01st edition)
Source: International Finance News