Take stock of central bank officials' important points: What is Libra's inspiration for the central bank's digital currency?

Recently, the National Central Bank has frequently spoken about the Facebook stable currency project Libra.

On July 8, at the launching ceremony of the Digital Finance Open Research Program and the first academic seminar, Wang Xin, the director of the Central Bank Research Bureau, introduced the latest research on the Facebook Libra, the central bank's digital currency and digital finance.

On July 9th, at the seminar on “China's Foreign Exchange Management Reform and Development”, Zhou Xiaochuan, former president of the central bank and president of the China Finance Association, focused on Libra's future currency development under the globalization situation and the response to the renminbi needs. Discussed.

In addition, Mu Changchun, deputy director of the Paying Division of the People's Bank of China, also discussed Libra in a long article.

This article starts from Libra's discussion, the central bank's digital currency and China's future initiatives, and organizes the speeches of the three officials to readers.

How to treat Libra?

For Libra, Zhou Xiaochuan, former president of the central bank and president of the China Finance Association, gave a positive attitude.

He believes that Libra has made at least two improvements on the basis of past cryptocurrencies: First, it absorbs the lessons of previous cryptocurrencies trying to rush, and can avoid large fluctuations and speculative components; second, Libra is aiming at the hard demand in cross-border areas. Especially for developing countries, cross-border remittances still have time and cost barriers, especially for remittances of immigrants and migrant workers. There is indeed a high transaction rate for cross-border payments. The problem is longer, so it is aimed at this difficulty.

But Zhou Xiaochuan also said that Libra itself still has to make a question mark if it can succeed, but at least it puts forward an idea, which will have an impact. This is not only an impact on traditional business and payment systems, but its attempt to focus on a basket of currencies represents a trend toward a global currency in the future.

Wang Xin, director of the Central Bank Research Bureau, also believes that Libra's prospects are promising.

He said that Libra is likely to be widely used with the participation of the big platforms behind it and the large number of usage scenarios. If it can rely on itself to gain market trust, and thus it will increasingly be used as a value store, even as a credit, then virtual currency may have the function of money creation, and the impact on monetary policy will be greater.

He believes that digital finance is promising, and claims that the central bank is now officially approved by the State Council and is organizing market institutions to conduct research and development of the central bank's digital currency. The central bank's digital currency is defined as M0 in China, and this work fell to the IMF.

In the article of Deputy Director of the People's Bank of China, the Department of Payments, Mr. Mu Changchun pointed out the risks associated with Libra.

Mu Changchun pointed out that Libra is not linked to a single currency, and is pegged to a basket of currencies. If there is no IMF or similar international organization to control Libra's circulation and monitor the exchange rate between different currencies, exchange rate arbitrage will occur. In exchange for Libra, it caused competition between different currencies to print money.

In addition, Libra also has third-party market risk. The Libra Association is registered in Geneva, Switzerland, and is subject to Swiss law, but the main operating agencies are in the United States, subject to US law and regulatory arbitrage.

The current license is also a problem that Facebook has been avoiding at the moment, and there is no detailed explanation on the responsibility of “know your customer (KYC)”, anti-money laundering/anti-terrorism financing, and the responsibility is given to users and participating organizations.

Finally, he concluded that Libra created a convertible digital currency that flows freely across borders. The emergence and development of such stable currencies, whether from the implementation of monetary policy or macro-prudential management, cannot be separated from the support and supervision of the central bank and must be incorporated into the regulatory framework of the central bank.

What is Libra's inspiration for the central bank's digital currency and the renminbi?

Wang Xin, the director of the Central Bank Research Bureau, discussed the central bank's digital currency: "If the central bank directly issues the central bank's digital currency, it is the direct legal currency, which is the renminbi. It also helps the central bank's payment function. In this case, the central bank is not Can it deal with the impact and impact of the current virtual currency? In terms of payment, in the retail sector, will it lead to some new changes in the payment format? It may also reduce the impact of the cryptocurrency on the legal currency. Effective monetary policy Sex will also be maintained."

Wang Xin pointed out that it depends largely on whether the central bank's digital currency is carrying interest on it. If interest is paid, the central bank can adjust the interest rate to better and more easily realize the intention of the central bank's monetary policy.

Zhou Xiaochuan, former president of the central bank and president of the China Finance Association, believes that Libra’s attempt to peg a basket of currencies actually “represents a trend of a global currency in the future. Convergence and integration of RMB and foreign currencies. In the process, we need to consider the pressure of this trend on us."

Zhou Xiaochuan emphasized that maintaining a strong monetary status may put us in a favorable position in the process of globalization in the process of the entire internationalization of the renminbi in the future.

How does China act?

In the future, how digital finance supports the development of the real economy, Wang Xin, the director of the Central Bank Research Bureau, pointed out at the end of the speech that it will study four points in depth: First, issues related to encrypted digital currency such as Libra, such as whether it will form a legal digital currency and a few digital stability. Coexistence of coins; Second, to explore digital finance to better support the development of the real economy, should develop diversified and comprehensive financial services; Third, improve the framework of financial technology regulatory system, develop regulatory technology, and how to incorporate technology giants into the macro-prudential regulatory framework; Fourth, strengthen the construction of digital financial infrastructure and strengthen international coordination and cooperation in the field of digital finance.

He said that because even Libra, it is only a plan, but we can conduct academic discussions and deductions. Of course, one thing is certain, that is, traditional cash is definitely getting smaller and smaller.

He also pointed out that in the field of digital finance, it is necessary to strengthen international coordination and cooperation, and in particular, it is necessary to issue the voice of China as soon as possible. The voice of China does not necessarily represent the voice of the government. It should also have many important voices of the market and folk voices.

Zhou Xiaochuan, the former president of the central bank and president of the China Finance Association, also agrees. He pointed out that we need to have forward-looking preparations in policy research and reserves to minimize our weaknesses in possible crises.

“Recalling China's development, after the global financial crisis in 2008, one of the most important reasons why China can continue to narrow the gap with the United States is that our financial system is relatively sound. China just managed a major round of finance before the crisis. Reform, financial institutions, financial markets have been in a better state. Because of this, we are able to withstand the financial crisis relatively smoothly. This means that it is very beneficial for us to check potential risks ahead of time."