Li Lihui: Should study and issue a global digital currency implementation plan led by China

Source: Financial Network

Li Lihui, head of the blockchain working group of China Internet Finance Association and former president of Bank of China

“Digital currency will be at the core of the global digital economy in the future. Currently, we need to study and issue a global digital currency feasibility path and implementation plan led by China.” November 13, China Internet Finance Association Li Lihui, the head of the blockchain working group and the former president of the Bank of China, said in the "Financial Economics Annual Meeting 2020: Forecast and Strategy."

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Li Lihui believes that the economic defect of virtual currency is that it lacks sufficient physical asset support and credit endorsement, the price is unstable, and speculation is too heavy. The digital currency that can become a climate must be trusted. The legal digital currency can be trusted because of its legal status and national sovereign endorsement. The digital currency of any other institution must be trustworthy and must have some qualities.

Li Lihui said that digital currency poses a real challenge to us and should be an opportunity for us in the future. Its recommendation, first, we should master the dominance of digital technology and the digital economy. For example, it is necessary to further implement the national strategy of digital economy and digital technology, clarify the industrial policy, give preferential treatment to the professionals of digital technology R&D enterprises, and encourage the development and application of digital technology. The national team plus private team, Dazhongjia Xiaowei Master independent intellectual property rights in key areas of digital technology.

At the same time, China's legal digital currency should be further studied, such as the choice of alternative range, the scale of controllable anonymity, the technology of off-network operation and so on. Li Lihui emphasized that digital currency is at the core of the global digital economy in the future. At present, it is necessary to study the feasibility path and implementation plan of issuing a global digital currency dominated by China.

Second, we should accelerate the construction of the digital financial system. Based on ensuring the sustainable development of digital finance, we should promptly formulate systems for digital currency issuance and digital financial market supervision. We should promptly develop national standards for digital financial technology and establish a professional digital financial technology application review and verification system. In the construction of the global system of digital finance, China should actively participate and strive for the right to speak.

The following is a record of Li Lihui's speech:

Li Lihui: The currency we know, the first is the coin of precious metals, the second is banknotes, and then the funds on your bank account and mobile phone. How the future digital currency will affect our lives, this may be the most concerned about everyone, so my topic today is "Digital currency will not reconstruct our monetary system."

I divide the digital currency into three types: the legal digital currency, the virtual currency, and the digital currency of a trusted institution.

For the legal digital currency, what we need to pay attention to is whether it may be passed on to the existing monetary system and which aspects may be replaced. I refer to a digital currency with legal status, endorsement of national sovereignty, and subject matter of issue responsibility as a legal digital currency.

Many national central banks announced the launch of research and development of legal digital currency five or six years ago. Until now, other countries have not yet launched. China’s legal digital currency research and development has been almost five years now, and there are signs of preparation for issuance in the near future. Central bank officials revealed this information in both formal and informal speeches. Interpretation from this information, the legal digital currency of our country may be referred to as digital currency or electronic payment.

It will adopt a two-tier operation delivery system, digital currency can be directly issued, we will still choose the central bank to commercial bank to the public distribution model, which can inherit the current monetary policy transmission mechanism, should be conducive to maintaining business The initial credit capacity of the bank is conducive to stabilizing the market. If the initial credit capacity of the commercial bank is directly issued, it will be greatly restricted.

Adopt parallel technical routes and adhere to the central bank's central management model. Many experts believe that the current blockchain technology can not meet the high-density demand of the retail market in the large market. China is a truly large market. Now China's legal digital currency should remain technically neutral and not rely on a single technology, such as Blockchain technology should also adhere to a centralized management model to ensure the reliability of the monetary policy transmission mechanism and ensure the efficiency of currency regulation.

Replacing the currency M0 with a loosely coupled account. The electronic payment tools we are familiar with now use a tightly coupled account. Under the bank account management system, there is no way to achieve anonymous payment. Our legal digital currency may adopt the method of loosely coupling the account + e-wallet, which can be separated from the bank account, realize end-to-end value transfer, reduce the dependence of the transaction link on financial intermediation, and will be realized within the scope of the central bank's permission. Controlled anonymous payment. As for how much can be controlled, this is what the central bank is holding.

The design of our national legal digital currency may point to the replacement of M0, which is cash in flow, not the agreement currency M1 or the broad money M2. When discussing Chinese legal currency, we should also pay attention to the innovation of new payment instruments. Can we succeed? I think it depends on the adaptation factor.

Virtual currency, I define the coin or Token of the public chain community as virtual currency. Virtual currency is the reason for having its living soil, or growing economically. Its survival soil is the governance mechanism of the network consensus in the community of public blockchains, and the equivalents recognized by virtual currency participants. The trading of virtual currency can be anonymous, can be posted, difficult to control, or it can be a tool for speculative trading. The illegal trading in the dark market requires underground payment and management tools that are difficult to control. The technical drawback of virtual currency is that they use a decentralized public blockchain architecture. Until now, the verification of the entire network requires oversized data synchronization and node operation capabilities, whether it is Bitcoin or Ethereum has not solved this problem so far. The economic defect of virtual currency is the lack of sufficient physical asset support and credit endorsement, the price is unstable, and the speculativeness is too heavy. For example, in 2018, Bitcoin bottomed out at $3,158, which was 84% ​​lower than the highest price. For these reasons, virtual currency can only be marginal.

Trusted institutions digital currency, super sovereign and super bank. The digital currency that can become a climate must be trusted. The legal digital currency can be trusted because of its legal status and national sovereign endorsement. The digital currency of any other institution must be trustworthy and must have some qualities.

Now some multinational banks have been allowed to issue digital currency. These digital currencies are mainly used for settlement between banks and financial transactions, so they replace M1 and M2. What we need to focus on is Facebook's founding digital currency, Libra, which has outstanding advantages: it can provide enough trust endorsement and cover more than 2 billion basic customer populations around the world; apply distributed peer-to-peer architecture and privacy computing technology to build It can cover the global end-to-end trading platform; it is supported by hard assets and maintains the value of independent digital currency.

Libra was under much pressure from the start of the launch, because of how to get access to the market access of major countries, such as the efficiency and reliability of its technology platform? To what extent is its commercial operating model, feasibility and transparency? What about the path of control? The most fundamental reason is that Libra may become a super-sovereign currency and restructure the global monetary system.

There are three points: First, it may affect the status of sovereign currency. For example, a weak country may lose its national trust if it encounters major economic difficulties. In this case, it may be replaced by a super-sovereign digital currency. The sovereign currency of the developing economy will generally not exit the stage of the currency, but it will also become the anchor of the super-sovereign digital currency. In this case, if the super-sovereign currency develops larger and larger, The primary and secondary status of the super-sovereign digital currency and the so-called sovereign digital currency may be reversed. Second, it is possible to reshape the currency hegemony. Third, it is possible to form a financial system that spans commercial banks. Once it forms a financial infrastructure that covers every corner of the globe, it can start from the payment and clearing process, and gradually enter the fields of savings, financing, insurance, investment, wealth management, etc., penetrate the public's life, and compete for the market of traditional financial industry. .

When the CEO of Facebook responded to the lawmakers, he said that China’s financial infrastructure has now surpassed that of the United States. What he means is that if the United States does not approve Libra’s listing, the US’s currency hegemony status may be surpassed. I put forward a very special point of view, hoping to impress American politicians. As for whether Libra is approved, we have to observe.

Digital currency poses a real challenge to us, and it should be our future opportunity. What should we do? Some simple suggestions: First, we should master the dominance of digital technology and the digital economy. For example, we should further implement the national strategy of digital economy and digital technology, clarify the industrial policy, give preferential treatment to the professionals of digital technology research and development enterprises, and encourage the development and application of digital technology. The national team plus private team, large and medium plus small Micro, master independent intellectual property rights in key areas of digital technology. China's legal digital currency should be further studied, such as the choice of alternative range, the scale of controllable anonymity, the technology of off-network operation, and so on. Moreover, I believe that digital currency is at the core of the global digital economy in the future. Currently, it is necessary to study the feasibility path and implementation plan for issuing China-dominated global digital currency.

Second, accelerate the construction of the digital financial system. Based on ensuring the sustainable development of digital finance, we should promptly formulate systems for digital currency issuance and digital financial market supervision. We should promptly develop national standards for digital financial technology and establish a professional digital financial technology application review and verification system. In the construction of the global system of digital finance, we should actively participate and strive for the right to speak.

Thank you all!

(The guest's point of view is based on the live speech, without the speaker's own confirmation)

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