Former Director of the Central Bank on Digital Currency, Blockchain Application and Fintech Development

Source: Beijing News

Chen Jing, former director of the Science and Technology Department of the People's Bank of China and a member of the National Advisory Committee on Information Technology. Beijing News photo reporter Wu Jiang

"Further analysis of the application scenarios of the blockchain will help us understand the important applications of the blockchain, and draw a clear line with relevant exaggerated, unrealistic and even fraudulent things." Former Director of the Science and Technology Department of the People's Bank of China, National Information In a recent interview with the Beijing News, Chen Jing, an expert advisory committee member, said that in order to guide the development of blockchain technology to better promote the development of the financial industry, it is necessary to find suitable application scenarios for the blockchain and further solve relevant standardization and information. Safety related issues.

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Regarding the development of digital currency, Chen Jing believes that in the context of the unprecedented development of China's electronic money, it is necessary to further analyze what parts of our currency system are not suitable for China's productivity and social and economic development. China's launch of digital currency DC / EP should consider three major issues: market demand, legal compliance, and technology implementation. He suggested that in the era of the digital economy, China's digital currency issuance should be proactive, and at the same time, it should be highly cautious and down-to-earth exploration. May wish to think harder and more questions, and effectively prevent possible risks.

Regarding the face-brush payment that has attracted much attention recently, in Chen Jing's opinion, there should be reasonable and detailed regulations on what occasions face-brush payment can be used. What companies can use face recognition technology also need thresholds and regulatory requirements. Under the premise of continuous improvement and strengthening of security measures, face-to-face payment in some application scenarios is very promising.

Talking about the use of blockchain:

Need to find applicable scenarios to solve problems such as standardization and information security

Beijing News: In 2018, you proposed to be vigilant about the generalization, absoluteization, and even deification of the blockchain, and objected to the argument that it can be "subverted traditional financial IT architecture". For the application in the financial field, in which scenarios or links do you like the role of blockchain technology?

Chen Jing: With the advent of Bitcoin, the blockchain has attracted worldwide attention, and the Chinese government and all sectors of the society have attached great importance to it. We need to understand the blockchain scientifically, calmly, objectively and comprehensively, and promote the blockchain to play a better role in China's economic and social development.

In the development of human society, the centralization of information systems is a historical progress. However, the problem now is that under the situation of centralization of the information system, some applications are more efficient and lower cost when supported by decentralization and detrust intermediaries. This is where blockchain is useful. In my opinion, blockchain technology is an innovation, development, and supplement of processing technology in the entire information society, and it is impossible to replace all centralized processing architectures. In my opinion, it is necessary to emphasize the three major elements of the blockchain application scenario: there are not many nodes on the blockchain, the number of concurrently processed transactions (concurrency) is not very high, and there is no ready-made applicable centralized processing mechanism and conditions ( Or too expensive to build). These three conditions are indispensable.

I'm glad to see that the number of unrealistic applications of blockchain has been declining in recent times. It is worthy of great attention that after the CPC Central Committee attaches great importance to the innovative application of blockchain, some people in the society have used it to engage in false and fraudulent things. A line must be drawn from it.

Regarding the application prospect of blockchain in the financial field, last year I talked about supply chain finance and so on. I'm glad to see the documents issued by the CBRC this year to encourage the application of blockchain in the field of supply chain finance. At the same time, in terms of cross-border financial services, letter of credit management, partial cross-border payment settlement, etc., the use of blockchain meets the aforementioned three conditions and should be well applied. Under the leadership and guidance of the State Administration of Foreign Exchange, the China Banknotes Credit Card Company of the People's Bank of China has developed and established a cross-border financial blockchain service platform, which has been applied in 17 provinces, municipalities and autonomous regions, providing efficient and fast for small and medium-sized foreign trade enterprises Financing services.

Beijing News: What kind of work needs to be done to guide blockchain technology to better promote the development of the financial industry?

Chen Jing: The first job is to further emancipate the mind and find out the suitable application scenarios of the blockchain according to the objective needs of business development. Second, it is necessary to further solve the related standardization problems, which directly involve the alliance chain. Third, we must further solve the problem of information security in the use of blockchain. There is a risk that the distributed ledger information security and privacy are affected, and the financial industry is very sensitive to this.

Talking about digital currency:

Be positive and be cautious, and think of difficulties more

Beijing News: According to information, 25 years ago, the heads of the technology and bank card departments of major commercial banks organized by the People's Bank of China visited Singapore to inspect the planning and implementation of a "cashless society." What have you found?

Chen Jing: In the 1990s, Singapore proposed that to issue digital fiat currencies, it would be the first to realize a "cashless society" in the world. Because Singapore is a highly urbanized country with a small population, and the conditions for industrial informatization and the legal system are perfect.

At the end of 1994, Chen Yuan, the then deputy governor of the People's Bank of China, proposed that I lead a team to organize inspections at major banks, with a total of nearly 20 people. At that time, the Singapore Monetary Authority was responsible for the implementation of the entire project, and the technical solution was provided by the University of Singapore. We visited and researched the Monetary Authority of Singapore and the University of Singapore to learn more about their plans and ideas. Singapore wanted to be the first to achieve a "cashless society" in the world, but it ended in failure.

Later, I asked why they failed. Singapore told me that it was very complicated. For digital fiat currency business processes, the processes between the two nodes must be guaranteed by relevant laws and regulations. Digital fiat currency is provided in a virtual space and in an information network environment. No matter how good the information system, there will be failures, problems, business interruptions, and errors. Arbitration is required after an error. If the arbitration fails, a court decision is required. They found that the legal issues between the various nodes of the entire digital fiat currency process could not be solved, let alone the establishment and management of the entire technical system. This incident left a deep impression on me.

In the following two years, the Technology Department of the People's Bank of China also sent deputy directors to the United Kingdom to inspect Mondex digital currency twice. Mondex is an electronic wallet and digital currency developed by National Westminster Bank. Simple, all failed.

Beijing News: The People's Bank of China has been studying digital currency DC / EP for many years. From foreign practices, what aspects do you think can be used for reference or worth noting?

Chen Jing: Electronic money is an important component of digital currency. Bank cards are electronic money. At present, mobile payments, including QR code payments, are even more electronic money. China leads the world in this regard. In the era of the digital economy, the support of digital currencies is needed, and the development and application of digital currencies require active and serious research. The further digitization of the national monetary system is a major and complex issue.

With the unprecedented development of China's electronic money, it is necessary to further analyze where else in our currency system is not suitable for China's productivity and social and economic development. The most basic question is clear, and the development of digital currency has the right direction.

China's launch of digital currency DC / EP involves three major issues. The first is market demand. The second is legal compliance. Arbitration in the future requires arbitration. If arbitration is not possible, a court ruling will be required, which must be based on relevant laws. The third is related technical systems. It is now technically neutral. The statutory digital currency introduced by the People's Bank to replace M0 should be a set of encryption systems controlled by the central bank. It should be available wherever currency can be used. The technical solution implemented is very complicated. Blockchain is decentralized, and currency issuance is a national sovereign action. Beyond the People's Bank of China, no country will allow decentralized fiat currencies.

Based on these three factors, in the era of the digital economy, I suggest that China's digital currency issuance should be proactive and proactive, but also very cautious and down-to-earth exploration, may wish to think more about the difficulties. At present, "coaxing" in the society is very powerful, the currency has not been issued, and scam gangs have already occurred. These are all worthy of our vigilance. There is also online public opinion, especially after Facebook announced the launch of Libra (Libra), some people think that if China hurries to issue the world's earliest digital currency, will it make a significant contribution to the internationalization of the RMB and the replacement of the US dollar? I think things are far from simple. I hope to give the People's Bank more time and don't rush.

Talking about privacy protection:

The concept of privacy needs to keep pace with the times, to speed up privacy protection legislation

Beijing News: From time to time, data security and privacy issues in the financial services industry are provoking user nerves. How should regulators and platforms respond?

Chen Jing: On the one hand, as financial services become more open and more Internet-based, our concept of privacy must also keep pace with the times, and we cannot adopt the traditional concept of privacy invariably. For example, in the United States, people value personal privacy, but you need to make a credit card, a loan, a bank and other credit institutions need to check your credit history, you must sign and agree to check your credit history, that is, you need to give up some personal privacy , The bank will not give you a loan without signing. To get better financial services, financial institutions may need to understand your credit situation and provide relevant credit services based on your credit rating. In the Internet era, it is even more important to change concepts, and the concept of privacy must keep pace with the times.

At the same time, on the other hand, it is imperative to attach great importance to the protection of information security and personal privacy. People's telephones, WeChat signals, home addresses, etc. are everywhere, and many people receive unfamiliar sales, harassment calls, and even financial fraud all day long.

We should strengthen our work in two areas. First, relevant institutions, including banks, third-party payment institutions, and fintech companies, must have the concept of security and attach great importance to protecting personal privacy. There must be legal protection. At present, China does not have a comprehensive personal privacy protection law. It is necessary to expedite privacy protection legislation and effectively protect personal privacy in accordance with the law.

At the same time, the regulatory side should study carefully, draw on some successful experiences and lessons from other countries, and work out effective regulatory principles based on China's national conditions. Privacy should be appropriately liberalized, and at the same time protection should be strengthened, and the information and privacy that really need to be protected should be clearly defined. In my opinion, information security is a large industry in China and a vast market. It is called on enterprises, research units, colleges and financial institutions, and regulatory agencies to work together to set standards for government planning and regulatory agencies to accelerate the development of the network information security industry.

Beijing News: The security of face-to-face payments is now receiving much attention. Some people believe that online security authentication technologies such as "brushing face" need "franchise", and a higher entry threshold should be set for corresponding technology companies. What do you think?

Chen Jing: Face information is the easiest to obtain, or the easiest to grasp and apply, and it is more open than other biological information. It is indeed necessary to be cautious in using this information for identification. However, I think that any new thing is not perfect at the beginning and there are unsafe factors. We should actively improve and perfect it and explore appropriate application scenarios.

Two-dimensional code payment has hidden dangers at the beginning, and was suspended by the People's Bank of China. Later, the security improved, and it reopened again. It developed rapidly and received high praise from the society, which produced great social and economic benefits.

Development is the last word, and backwardness is the greatest insecurity. Face payment is the application of artificial intelligence in financial services. The general direction is correct. The existing problems must be continuously improved. After everyone's hard exploration and hard work, applications such as face brush payment will gain social approval. At the same time, security is divided into occasions and levels, and small funds should be paid for convenience, while large amounts should be paid for security. With the support of the regulatory authorities, banks are implementing this policy, which I think is quite right. China is developing rapidly, and we need to handle this dialectical relationship well.

On what occasions can I pay by brushing my face? There should be detailed regulations. What companies can use face recognition technology, I also agree that a threshold is required and there are regulatory requirements. Generally speaking, it should be actively used. Two years ago, China Merchants Bank started using face recognition. Agricultural Bank has promoted face payment. Recently, China UnionPay and more than 20 banks jointly launched face-to-face payments. Under the premise of continuous improvement and strengthening of security measures, I think this is very promising, which will make society operate more efficiently, make people's lives more convenient, and truly realize information-enabled society.

Talking about fintech development:

Regulatory technology is the focus of the next development

Beijing News: In recent years, China's fintech has developed rapidly. In what areas do you think the potential of fintech has yet to be explored?

Chen Jing: China's financial technology has developed rapidly, including financial services such as payment and credit. So far, it is still dominated by the informatization of comprehensive business of financial institutions. Another important aspect of FinTech development is regulatory technology. A few years ago, the national level was very concerned about how to use advanced information technology to prevent and resolve financial risks. At that time, we thought that this was a weak link. After all, supervision involves management, and it is more complicated when it comes to people. However, the application of financial information technology has now reached the level of information and intelligence for supervision.

How regulators use advanced fintech technology to provide modern means to make supervision more efficient, more timely and effective, and less costly. This has been a long-term pursuit of regulators, but it is also a weak link. One of the key points for the development of fintech in the next step.

For example, in the United States, banking financial institutions provide regulatory reports in real time according to the requirements of regulatory authorities. They have been generated automatically, not manually. Their off-site auditing methods are relatively advanced and complete, and they have been put into practical use and commercialized, while China has relatively few. A long time ago, the accounting systems used by Bank of America were designated or provided by US regulatory authorities such as the US Federal Reserve. Supervisory authorities can accurately understand the operation of the entire financial institution in real time, legal operations and possible violations.

In my opinion, this is a significant use of fintech or information technology to regulate risk in the regulatory field. Especially with technologies such as big data and artificial intelligence, it used to be difficult for people to make judgments. Now machines can find them in a timely and accurate manner. Through the informatization of the supervision process and supervision methods, the supervision efficiency will be greatly improved, and at the same time, it will help financial institutions to operate in compliance and law.

In addition to regulating technology, there is also technology regulation. With the widespread adoption of fintech today, new risks may arise. For example, cloud computing, big data, the Internet of things, blockchain, face recognition, voice recognition, and QR code applications in the financial field, how to monitor and prevent new risks? Advanced science and technology can and must play a role.

Optimistic about the further application of artificial intelligence, blockchain and other technologies

Beijing News: In 2020, which new technology application and development are you most optimistic about?

Chen Jing: In the new year, I think that cloud computing, distributed architecture and big data will further promote the application in China's financial industry. At present, the regulatory requirements for financial risk prevention and control are higher. For example, the entire video of banks selling wealth management products has greatly increased the amount of data. The processing capacity and storage capacity of computers are large, and it is not that cloud computing and distributed architecture cannot adapt. At the same time, it is also optimistic about the further application of artificial intelligence and blockchain technology.

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