This article will introduce Sun Guofeng , Director of the Monetary Policy Department of the People's Bank of China, on the latest views of the central bank's digital currency. This article is the second in a series.
Core point of view:
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The central bank's digital currency is a digital currency issued by the central bank, supported by the state's credit, and fully equivalent to statutory banknotes and coins.
2. The background of the times and the predictions of Friedman
With the impact of the rapid development of virtual currency such as Bitcoin on the legal currency system, the central banks of major countries have gradually realized that only the issuance of central bank digital currency can fundamentally guarantee the market position of legal tender.
Friedman’s conjecture is turning into a prophecy – “something that connects the two actions of buying and selling is called money, which has appeared in various physical forms for thousands of years – from stones, feathers, tobacco leaves. , shells, to copper, silver, gold, and even the entries recorded in the current banknotes and ledgers. Who knows what form the future currency will evolve into? Will it be computer bytes?" "The scourge of money – money The big event that is unknown in history, 1991.
3. The inevitability of the central bank to issue digital currency
The advantages of digital currency: (1) to improve the security of funds, through the blockchain and "crown number" to achieve tracking of the whereabouts of funds. (2) Changing the traditional way in which third-party intermediaries participate in transactions. Equivalent exchange of electronic values is achieved in the absence of mutual trust and without the involvement of financial intermediaries. (3) Provide a better reference for monetary policy decision-making and provide timely and truthful information to the supervisory authority for comprehensive monitoring and evaluation of financial risks. (4) Increase the transparency of economic activities, reduce the occurrence of illegal and criminal activities such as money laundering and tax evasion, and enhance the central bank's control over money supply and currency circulation.
4, two distribution models
The first is the traditional “central bank-commercial bank” model. In the 17th issue of China Finance, in 2016, a series of articles on digital currency research projects and members of the People's Bank of China were published. The article clearly expressed the preference for such a distribution mechanism. That is, under the existing currency framework, the legal digital currency will gradually replace the legal currency without subverting the existing currency issuance and circulation system.
Second, untested "central bank-public" model
If this mode is chosen, it means that the central bank can open the money-sending helicopter when necessary and directly implement the monetary policy of negative interest rate.
Regardless of which digital currency issuance mechanism is chosen, it is certain that the era in which commercial banks are lying to make money will become history.
5. International progress of central bank digital currency
The book introduces the progress of central currency digital currency in the United States, Britain, Switzerland, the Netherlands, Canada, Sweden, etc., which details India's 2016 money-losing movement, which is used as a central bank to complete the new currency issuance and the old currency withdrawal operation. Experimental case.
6. Three modes of central bank digital currency issuance
The central bank's direct issuance model, digital cash model and banknote issuing bank model.
The central bank's direct issuance model means that the central bank directly issues digital currency to the public, providing digital currency distribution, circulation and maintenance services. Since it does not require the direct participation of commercial banks, it is also called a one-way distribution model or a one-tier delivery method. .
The digital cash model and the issuing bank model are all central banks that put digital currency through commercial banks.
The digital currency that the People’s Bank of China had previously explored was the model. The People's Bank of China named the digital currency DCEP (Digital Currency Electronic Payment), which is a digital currency electronic payment, focusing on the application of digital currency in retail payment, and pursuing the convenience of retail payment system while considering security and privacy protection. , fast and low-cost, DCEP can be based on blockchain or based on distributed ledger technology, or it can be based on existing electronic payments. The digital currency in this mode not only maintains the attributes and main features of the cash, but also meets the need for portability and anonymity. Since it is an alternative to M0, it should not be paid interest, and it will not have a big impact on the current monetary and financial system.
Figure: The impact of three digital currency issuance models on commercial banks
7. What can the central bank’s digital currency do and cannot do?
The central bank's digital currency has many functions that cash does not have, which is conducive to better developing the functions of current monetary policy, such as anti-money laundering, anti-counterfeiting and negative interest rates. Non-monetary functions that match the functions of the digital currency itself can be loaded into digital currencies under certain conditions and within appropriate limits, such as anti-corruption. Then, non-monetary functions that do not match the function of the digital currency itself cannot be loaded.
Vice President Fan Yifei of the People's Bank of China once wrote that “the central bank's digital currency is an alternative to M0, and it has unlimited legal liability, that is, it undertakes functions such as value scale, circulation means, payment means and value storage.” At the same time, he also stressed that "in order to maintain the legal status of unlimited legal compensation, the central bank's digital currency should not assume other social and administrative functions besides the four functions that the currency should have. Loading smart contracts other than the function of the legal currency itself, Will affect its compensation function, and even degenerate it into a valuable ticket, reduce the free use of China's central bank digital currency, will also have an adverse impact on the internationalization of the RMB. It will also reduce the speed of money circulation, affect the transmission of monetary policy and the central bank. Performing macro-prudential functions." Therefore, there should be too many unreasonable expectations and fantasies about loading non-monetary functions in digital currencies.
1. The inevitability of the central bank to issue digital currency. Inevitability, friends, inevitability .
2. For the central bank's digital currency, the People's Bank of China already has a variety of plans, and deducted the pros and cons of each program. And tend to be more prudent in the whole process.
3. The central bank's digital currency will not load intelligent contracts, leaving a lot of room for exploration in the commercial application of blockchain. For example, the genecoin GeneCoin.com project we are working on is to block the chain and protect personal health data, as well as empower personal credit distribution.
4. This chapter deals with the concept of more credit currencies, including the relationship between the central bank and commercial banks. Because it is not the focus of this article, it is mostly omitted. Interested friends, recommended to read the original text, as well as Comrade Sun Guofeng's old work "First Row", equally exciting.
5. Banknotes are also anonymous currencies, and no one has written any names on them. Therefore, many lawless elements (such as corrupt officials) will choose to hoard a large number of banknotes to evade detection. I feel that the central bank's digital currency will focus on this. With the popularity of 5G technology and IPv6, anonymous currency will be terminated.