Wang Xin, the central bank: How does Libra inevitably impact the central bank of the French currency? (with the full text of the speech)

At the launching ceremony and the first academic seminar of the Digital Finance Open Research Project held on July 8, Wang Xin, director of the Research Bureau of the People's Bank of China and head of the currency management bureau, on the central bank's major international organizations and central banks on digital finance, Some of the concerns of financial technology and the sharing of digital finance and digital currency issues that you may be concerned about from a policy perspective.

Golden Finance will summarize the main points of the speech as follows:

1. Now that the Central Bank has officially approved the State Council, it 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 is a certain degree of substitution for cash.

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2. Whether the central bank's digital currency can cope with the impact and impact of virtual currency, whether to change the payment format depends largely on whether the central bank's digital currency is interest-bearing. If interest is paid, the interest rate can be adjusted. Thus, it is better and easier to achieve the intention of the central bank's monetary policy.

3. When talking about Libra, Wang Xin said that Libra will form a battle with the legal digital currency and a few digital stable coins. Behind the currency is interest, right, politics, international politics, and diplomacy. So if a payment instrument plays a monetary function to a considerable extent, it will inevitably impact the legal currency, and thus it will be an international currency. Regulation, financial regulation, and even all aspects will have a direct impact. On the one hand, cryptocurrencies break down territorial restrictions and industry restrictions. On the other hand, the fewer tools or currencies to pay, the better. Money involves rights, national sovereignty, and whether countries can openly accept international currencies or super-sovereign currencies. This requires a big question mark.

4. Libra claims to be a basket of currencies, which solves the problem of trust and the problems of widespread use to some extent. But everyone will question the question behind how much the dollar will play, whether it is anchoring a basket of currencies and essentially anchoring the dollar. In the realm of virtual currency, which is ultimately closely related to the US dollar, then the international monetary system may form a coexistence of the former legal currency and the digital currency with the US dollar as the core. If this is the case, it will bring a series of It is not only a matter of economic and financial, but also a series of complicated issues in international politics and political economy.

5. How does the central bank deal with Libra? First, everyone has different ideas. Some people have proposed to strengthen the introduction of the central bank's digital currency. Some people have proposed that the IMF issue a super-sovereign digital currency. Others say that issuing something like Libra in the country is worthy of attention. The second is to explore digital finance to better support the development of the real economy. Third, improve the institutional framework for financial technology supervision and develop regulatory technology. Fourth, strengthen the construction of digital financial infrastructure, because digital financial infrastructure involves a large number of technical issues, such as privacy protection, the security of financial infrastructure, and so on. Fifth, consider how to strengthen international coordination and cooperation in the field of digital finance.

The following is the full text of the speech:

Wang Xin: Dear Director Li, experts, colleagues, good morning everyone!

I am very happy to have this opportunity to participate in the conference established by the open platform. I think this is really a platform for strong academic research. Just now, Mr. Huang Zhuo mentioned Libra. In fact, when Facebook released Libra, our digital financial research platform was also established. I think this may not be a coincidence. At least it shows that domestic and international attention to digital finance and financial technology is highly valued, and it is not only from academic research, practical application, etc., but also puts forward very urgent issues. Our platform is a number of academic institutions, and we have received the support of Ant Financial, the most advanced international leader in digital finance innovation, and a very important feature of ours is the beginning of our digital finance. Focusing on the real economy and focusing on inclusive finance, I think this is very important for us to continue to compete with international counterparts internationally, hoping to maintain a leading position and ultimately serve the real economy.

Our People's Bank of China has also been highly concerned and involved in relevant research work. In 2015, our institute established a research center for internet finance. I am still in charge of the work of the Monetary Fund. Originally, the Monetary Fund was responsible for the traditional cash business. Most of us here are mainly young people. Basically, we rarely use cash. With the ants, The rise of Tencent and other platforms, I originally thought that my work will be more and more relaxed, and I have more time to read some books. However, I did not expect that, but we also participated in the central bank. Since 2014, under the strong advocacy of Zhou Xingchang, we started the research and development of digital currency and central bank digital currency. Now that the Central Bank has officially approved the State Council, it is organizing market institutions to conduct research and development of the central bank's digital currency. This work should be said to start early, but not as Mr. Huang said, can we continue to maintain our leading position and we need to do a lot of work.

In short, the difference is because the central bank's digital currency is defined as M0 in China, which is a certain degree of substitution for cash. So this work also falls into the most traditional form of currency in which the IMF manages cash, and it also enters the most advanced form of digital currency. Therefore, we also feel that the pressure is very large, so it is also very urgent to cooperate with our industry, academia, financial community, and Internet companies to participate in relevant research.

Today, I would like to briefly report to you, mainly from the perspective of the central bank, on the international financial sector or some international organizations, as well as the areas that the central bank is concerned about. Of course, before, more is a kind of impact on payment. Everyone knows that Tencent Ant Financial and so on have made very fast progress in payment. Later, virtual currency, or digital assets, appeared. So everyone is concerned about whether it will have some substitution for currency. Of course, because of its price fluctuations and its inconvenience in trading, international organizations such as FSB believe that it has not been in a certain period of time. Really exerting the function of money, the impact on financial stability, and the impact on monetary policy, it does not replace the real currency to a great extent, so the impact on monetary policy is not very large, and the impact on financial stability is not very Big. Of course, some important issues have also been raised.

With the birth of Libra's plan, this time everyone attaches great importance to it because it claims to be a basket of currencies, which solves the problem of trust and the problem of widespread use to a certain extent, because it has a large number of platforms. If it is said that it can have a relatively large development prospect in the field of payment, especially in the field of cross-border payment, then if it is further used, is it able to play more of the function of money, this The problem is very big. Monetary policy, financial stability, and even the international monetary system may have a major impact on countries. Everyone will guess behind it, how much the dollar will play, whether it is a set of monetary trends, and in fact the dollar is determined. In the process, if the United States finally forms a kind in the digital field, it is virtual. The realm of money is ultimately closely related to the US dollar. Then the international monetary system may form the coexistence of the former legal currency and the digital currency with the US dollar as the core. But in the end, it is likely that everyone thinks it is just a boss. That is the dollar, the United States. If this is the case, it will bring a series of problems not only economic and financial, but also a series of complicated issues in international politics and political economy. So this aspect is much broader than the dimensions discussed by everyone two months ago. Therefore, the establishment of our current research platform is just the right time. We are very willing to contribute our strength in the next stage. From the perspective of policy research, from the perspective of practice, we can cooperate with you from the perspectives of monetary policy and financial stability. To conduct more research on interesting issues.

I mainly talk about two aspects. The first part is from the perspective of our central bank for some major international organizations and central banks on digital finance and some aspects of financial technology; the second part, from my personal point of view to the next stage At least from the perspective of policy, we may be more concerned about the issue for your reference.

From the perspective of the government, from the perspective of the central bank, of course, we are more concerned about three aspects. One is for financial services. Now we know that support for the real economy, for Pratt & Whitney, etc., whether it is digital finance or our traditional finance, obviously A focus. The second is the impact on monetary policy, and the third is the impact on financial stability.

The first aspect is the impact on financial services. Many studies believe that the development of financial technology and the rise of digital finance, financial technology can improve the efficiency of financial services, promote service innovation, and can bring more efficient and more accurate services. The application of artificial intelligence technology can greatly optimize the business model of financial institutions, and it will also have an important impact on the behavior of banks. More creative companies can use the Internet to gain access to credit faster with new formats, thus contributing to economic growth. For the technology giants, everyone’s interest is getting stronger and stronger. The technology giants can provide financial services that are more efficient, cheaper and cheaper. This stems from the financial innovation itself and the intensification of competition brought by the technology giants. . There will be direct changes in the product area for customers, as well as the stickiness of financial institutions and customers, as well as the impact on competition.

Obviously, the development of financial technology and the discovery of financial technology giants will force the transformation of traditional financial institutions. Everyone knows that a large number of financial and technological investments have been made for large banks. In fact, their progress in these areas is also very fast. At the same time, small and medium-sized banks attach great importance to this piece. They are in the inclusive finance and are in the first line of supporting small and micro enterprises. However, they do not have enough strength to make large investments in financial technology. So I will mention later, how to help small and medium-sized banks to catch up with the rapid development of financial technology, to transform his business and technology and other mechanisms, these are important issues in the next stage.

Financial big data has brought about important changes in both quantitative investment and smart investment. The development of science and technology finance enables financial institutions not only to adhere to KOIC, but also to understand your customers. Because of the importance of data, it is necessary to understand your data, so that the risk can be more accurately priced, thus realizing the effective allocation of financial resources.

Promoting the development of digital inclusive finance in these areas is an area of ​​very important application. In this regard, the People's Bank of China has always attached great importance to it, and it has always played a leading role in international financial exchanges and international cooperation. From the 2016 Hangzhou Summit People's Bank on behalf of China as the chairman of the G20 Global Inclusive Financial Partners, at that time promoted the introduction of the G20 inclusive finance advanced principles, after which the People's Bank of China either served as the chairman of the joint GPFI, has also been the digital inclusive finance Advocates, so it has always been the work of the relevant countries in promoting relevant aspects. Because in these respects, digital finance can be said to be promising. Because of the characteristics of inclusive finance, traditional financial institutions have their shortcomings and disadvantages involved in inclusive finance. With the help of digital finance and financial technology, they can overcome the problem to some extent. Huihui financial risk is too large, high cost, low returns, of course, with the low-cost collection of large amounts of data, and the effective application of technology, our traditional concepts may be broken, not necessarily It must be high in cost and low in return. For example, the familiar practice of Ant Financial is also a way to provide relatively low-cost services for inclusive finance through the power of technology.

There are some discussions on the impact of monetary policy, because this is the area of ​​greatest concern to the central bank, especially in terms of digital currency, which is now more discussed. There may be several perspectives: 1. Intensifying competition in the financial industry, and big data has improved the ability of financial institutions and the real economy to obtain information. The market may be more sensitive to the reflection of interest rates, making the transmission of monetary policy more efficient. But it may also lead to excessive reflection. 2. The development of financial technology has promoted the expansion of non-bank financial institutions. Traditionally, our monetary policy has been basically transmitted through commercial banks. If more and more financial services and financial services are used by non-bank financial institutions. If it is carried out, it will obviously have a direct and significant impact on the transmission of monetary policy. 3. Regarding asset prices, we all know that the central bank has been concerned about asset prices in addition to the CPI price index. This has been controversial. But in any case, the central bank should pay attention to changes in asset prices and pay attention to changes in the economic cycle. This is the unshirkable responsibility of the Central Bank. Therefore, in the case of the development of financial technology, there will be a direct impact on changes in asset prices. Some transactions on the e-commerce platform, of course, there are many transaction prices of traditional commodities, for the price of assets through the asset market, some use of financial technology in the asset market, whether it is the general commodity price or asset price, it may The adjustments will be more frequent and more intense.

Virtual currency, of course, can be understood. If virtual currency can replace traditional currency to a greater extent, the central bank is mainly aimed at the operation of traditional currency, of course, the effectiveness of its monetary policy will certainly be reduced. Especially Libra, everyone is very concerned, if you take advantage of the participation of a large number of platforms on its platform, there are a lot of application scenarios, if it is widely used. Some people even think that at a certain stage, it depends on a package of legal coins for credit support, but whether it can gain the trust of the market itself, so that it will have more and more value storage, even used as credit. It may have the function of currency creation, and it will have a greater impact on monetary policy. Of course, this is a very controversial issue.

Now that we are in the digital currency of the central bank, we think that if the virtual world is based on encryption algorithms, so-called virtual currency or virtual assets, if it is not reliable, if we create a central bank to issue the central bank’s digital currency directly, Just as we are trying to do now, the central bank, in fact, like the Bank of England, the Bank of Canada, the Central Bank of Sweden, is also doing some related research and experimentation, but the details are not very clear. If the central bank directly issues the central bank's digital currency, of course, it is the direct legal currency, that is, the renminbi. In this case, it helps the central bank to pay for the function. In this case, can it deal with the impact and impact of the current virtual currency? Will re-in the retail sector in terms of payments lead to some new changes in the payment format? It can also reduce the impact of cryptocurrencies on fiat currencies. The effectiveness of monetary policy is also eager to be sustained. Of course, this depends largely on whether the central bank's digital currency is interest-bearing. If it is interest-bearing, it can adjust the interest rate to make it easier and easier to achieve the central bank's monetary policy intention. At least one point, in the current zero-interest rate limit in many countries and regions in Europe and the United States, if the interest rate is very low, or even negative, it may transfer to cash. In the case of central bank digital currency, cash has become less and less, and this transfer is hard to come true. Even if you pay interest to the central bank's digital currency, it is clear that the realization of the central bank's policy intentions is of great benefit. There are also some international scholars who have vigorously advocated and put forward policy recommendations in this regard.

The impact on financial stability, the more concentrated considerations are in several ways, may increase the risk of financial disintermediation, and bring the risk of regulatory arbitrage, this discussion is more. It is because many of our institutions engaged in digital finance are not completely under the current financial supervision. Different countries with different regulatory authorities have different regulations on related regulations, which will lead to regulatory arbitrage or regulatory Blanks, these may bring about the generation and spread of risks. In particular, the issue of BigTech is also being discussed internationally. It is the problem of the technology giant. In fact, it has become an insurmountable example. Therefore, it will have a direct impact on financial management and systemic financial risk prevention.

Financial technology may be more concealed, destructive, and systematic. While seeing its benefits, everyone should pay enough attention to many areas of its rapid development. There are also data risk and information security risks that are mutually reinforcing, and the time relationship is a little bit. Everyone is an expert in this area.

The second part, briefly mentioning from the perspective of our policy, I personally think that at least in the near future, we need to consider several aspects in depth. These have just been mentioned. In order to promote the research and development of the central bank's digital currency, we have set up a central bank digital currency research institute, and also cooperate closely with the local government in Shenzhen and other regions, and also carry out systematic development.

First of all, about the encrypted digital currency, especially the stable currency represented by Libra. Because the past bitcoin fluctuations are too large, the focus of everyone's attention is now the first stable currency. Especially Libra, will it form a pattern of coexistence of legal digital currency and a few digital stable coins? Of course, from the very beginning, it may be a situation of squad, but in terms of the use of money, it should eventually be in a relatively fast time, through market elimination, or through the government’s intentional influence, it should be used as a payment tool or In terms of money, because it has the externality of the network, it can only exist with very few payment instruments or currencies, so as to reduce the cost of market transactions. Everyone knows that money is behind interests, rights, politics, international politics, and diplomacy. So if you say a payment tool, even if it plays a monetary function to a considerable extent, it will inevitably impact the legal currency. The regulation of an international currency, the regulation of finance, and even all aspects will have a direct impact. Therefore, on the one hand, in the development of science and technology, it may make many restrictions on the past and the limits of the industry, which may not exist in the digital age. From the perspective of the externality of the network, the less the tools or currency to pay, the better, so it is convenient, this is the inherent needs of the market itself. But we are still continuing under the big pattern of a sovereign country, and now there is still a period of time in the future. Everyone can see that there is some stagnation in globalization, and even some reversal in some aspects. Policies, closed policies, etc. are emerging. Can it be in the field of currency, the most important financial field, involving rights and national sovereignty? It can open up to the so-called international currency or super-sovereign currency. This is a big question mark, but some kind of conflict between technology, market, and national sovereignty will exist for a long time in the future.

Next, how do we deal with Libra? I believe that everyone will have different ideas, such as strengthening the introduction of the central bank's digital currency. For example, countries also support the issuance of their own things like Libra to deal with the challenges of international payment, which is also worth considering. Even the IMF jumped out. Of course it was an idea two years ago, but it was re-raised by everyone. For example, the IMF issued a super-sovereign digital currency, which is worthy of attention.

The second point is to explore digital finance to better support the development of the real economy. This is also an important research area of ​​our platform and continues to deepen in our inclusive finance. In terms of digital paving, we will strengthen our strengths and cope with external challenges when we have a good foundation.

The third point is how to improve the institutional framework of financial technology supervision and the development of regulatory technology from our regulatory authorities. There are a lot of practical problems to be studied, except for the big technology giants, because it is systematic. Financial risk issues. For example, a very real question, after Libra appeared, did you allow Libra to be used in the country as well? There are more and more voices on the market. In the past few years, we have adopted a very strict attitude towards virtual currency and virtual assets. What kind of love attitude and strategy should I take after Libra? Even if it is in our national government, if we support our institutions, of course, I am talking about an idea, because even Libra itself is only a plan, but we can conduct academic discussions and deductions. If we also support our institutions, we have very good foundations and conditions, and we also issue a Chinese version of digital currency like Libra. What should its application be? It is mainly used for Libra competition. Whether it is used in the international field, or whether it can be widely used in the territory, it will affect our current RMB. Of course, one thing is certain. Our traditional cash is definitely getting more and more reduced. My energy may shift from physical cash to digital cash. This is a huge challenge for me. It is also interesting and challenging for all of you here. Question.

Fourth, there is also the strengthening of the construction of digital financial infrastructure. Because it involves a lot of technical issues, such as privacy protection, the security of financial infrastructure, and so on.

The last point is very important, but it is also likely to be a very important aspect. How to strengthen international coordination and cooperation in the field of digital finance. Our industry and academic circles have already played a very good role, for example, with the IMF. Dialogue and so on. In fact, there are more and more discussions on the platforms of international financial policies such as BIS, IFM, etc. On these platforms, we especially need to send out the voice of China as soon as possible. The voice of China does not necessarily fully represent the voice of the government. There should be a lot of important market voices and folk voices. In this way, we can better safeguard China’s interests in the discussion of relevant international policies, the formulation of rules and standards, and even the competition for genuine products and services. Promote the development of our digital finance. In the end, it will better support the real economy and better prevent financial risks. (Golden Finance)

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