How to accelerate the development of digital currency in the second half of the year?
At the beginning of August, the central bank held a work video conference for the second half of 2019. The meeting called for accelerating the pace of research and development of my country's legal digital currency. At the same time, some media inquired about the patent inquiry system of the State Intellectual Property Office. According to statistics, as of August 4, 2019, the Digital Currency Research Institute of the Central Bank has applied for a total of 74 patents related to digital currency.
my country's central bank's digital currency is constantly promoting development, and its research and development framework is gradually revealed.
secondary title
(Organization: Interlink Pulse)
What is central bank digital currency?
At present, countries have not reached a unified consensus on the definition of central bank digital currency.
However, Yao Qian, former director of the Digital Currency Research Institute of the People's Bank of China and general manager of China Securities Regulatory Commission, made related discussions in the article "The Past and Present of Digital Currency" published earlier this year.
In the article, Yao Qian mentioned that in 2018, a report by the Bank for International Settlements (BIS) gave a more interesting definition, which uses the method of exclusion to define: it summarizes the various payment instruments that currently exist, and then determines Those that are not the central bank digital currency, after excluding one by one, the rest is the central bank digital currency.
After exclusion, BIS believes that there are two possibilities. One possible central bank digital currency is that the central bank’s account is open to the public, allowing the public to open an account with the central bank like a commercial bank, which is equivalent to the development of a super Alipay by the central bank. Serving all C-end customers. BIS believes that the central bank currency formed in this way is the central bank digital currency, and calls it the account-based central bank digital currency (CBDA).
Another possible central bank digital currency is a token issued by the central bank using Bitcoin technology, which can be called a token-based central bank digital currency (CBCC). retail.
Yao Qian said that account-based or token-based represent two different technical routes, and it remains to be seen which idea will occupy the mainstream in the future.
secondary title
Subject and scene: mostly used in retail, micropayment is a substitute for M0
Summarizing the relevant information of the central bank's digital currency, we can see that my country's central bank's digital currency allows commercial banks, non-bank financial institutions, households and companies to access it, and its applicable fields are retail and micropayment, and it is for M0 instead of M1 and M2 substitute.
In particular, regarding the issue of M0 or M1 or M2, several relevant leaders of the central bank have repeatedly pointed out in articles and speeches. Let me introduce its concept first, M0 is cash in circulation; M1 is M0 + corporate current deposit; M2 is M1 + quasi-currency (time deposit + resident savings deposit + other deposits). In a simple description, M0 is equivalent to cash in hand, M1 is cash plus bank demand deposits, and M2 is the former two plus time deposits and other forms of currency with purchasing power.
Inter-chain pulse observation, the first person to discuss this point in detail was Fan Yifei, the deputy governor of the central bank. In January 2018, Fan Yifei published a signed article "Several Considerations on the Central Bank's Digital Currency", in which he proposed that China's central bank's digital currency design at this stage should focus on M0 instead of M1 and M2.
On the one hand, M1 and M2 are based on commercial bank accounts, which have already been digitized or digitized, and there is no need to digitize them again with digital currency; however, it is increasingly necessary to digitize existing banknotes and coins. On the other hand, non-cash payment tools are all based on a tightly coupled account model, which cannot fully meet the public's needs for easy-to-use and anonymous payment services, and cannot completely replace M0.
Two months after Fan Yifei’s post, Yao Qian, the former director of the Central Bank’s Digital Currency Research Institute, published an article titled “Technical Considerations of the Central Bank’s Digital Currency”, which further explained Fan Yifei’s previous ideas in “Some Considerations on the Central Bank’s Digital Currency”. It is also pointed out that the primary starting point for my country's research and development of the central bank's digital currency at this stage is to supplement and replace traditional physical currencies, and its definition belongs to the category of cash (M0).
Later, in July 2018, Wang Xin, director of the Central Bank’s Research Bureau and the Bureau of Currency, Gold and Silver, said in a speech that in China, it may be more reasonable to use CBDC for retail payments. Wang Xin said that the central bank's digital currency replaces physical cash, which mainly means that the central bank's digital currency is mostly used for retail and small payments, and it is a replacement for M0 rather than M1 and M2. But that’s not to say physical cash is going away anytime soon.
secondary title
Delivery mode: through the two-tier delivery system of commercial banks
After the goals and scenarios are clarified, how the central bank's digital currency will reach its target subjects is the ensuing question. That is, the delivery mode of the central bank's digital currency, and the inter-chain pulse observation. Regarding this point, the relevant leaders of the central bank have basically the same views.
The first is the model aspect of the two-tier delivery system.
Also the article "Several Considerations on the Central Bank's Digital Currency" by Fan Yifei, the deputy governor of the central bank, first pointed out that the central bank's digital currency should adopt a two-tier delivery system (the two-tier delivery model of "central bank-agent delivery business organization"). Institutions such as the central bank and commercial banks can cooperate closely without presupposing technical routes, fully mobilize market forces, and achieve system optimization through competition, joint development, and joint operation.
Yao Qian also mentioned in his interpretation of the article that whether it is the traditional "central bank-commercial bank" dual model or the formulation of a two-tier delivery system, the issuance of the central bank's digital currency must choose a model that is compatible with the existing monetary system and business structure. And the way with the least infrastructure impact.
And just last month, Zhou Xiaochuan, former governor of the central bank, also said at a seminar that China could entrust commercial entities to issue digital currencies. It is also a concept similar to the "two-tier delivery system".
The second is the main aspect of the two-tier delivery model.
The two-tier delivery model mentioned by Fan Yifei in his article is based on commercial banks; what Zhou Xiaochuan proposed is commercial entities. He told the meeting that China could learn from Hong Kong's monetary system, which allows "commercial entities" to issue banknotes backed by their private assets. Bank of China (Hong Kong), HSBC and Standard Chartered are known to be Hong Kong’s note-issuing institutions and back them with dollar reserves they hold. By following this currency-pegged model, China can avoid the “huge volatility” that plagued cryptocurrencies in their early days, Zhou said.
secondary title
Supervision form: front desk voluntary background real name
In terms of supervision, it is clear that, in order to achieve the goals of monetary policy and macro-prudential management, my country's central bank's digital currency is different from the decentralized issuance model of various tokens.
At the recent press conference on financial statistics for the first half of 2019 held in July, Zhou Xuedong, director of the General Office of the Central Bank, pointed out that when talking about Libra, whether it is a legal currency or a virtual currency that has emerged in recent years, there is one point that everyone has reached a consensus , that is, must accept supervision, such as anti-money laundering, anti-terrorist financing, information protection and other aspects of supervision.
Fan Yifei also mentioned in his previous article "Some Considerations on the Central Bank's Digital Currency" that it is necessary to ensure the central position of the central bank in the launch process; to ensure and strengthen the central bank's macro-prudential and monetary policy regulation functions; to realize the central bank's digital currency launch tracking and monitoring. my country's central bank's digital currency should be launched in a loosely coupled manner with accounts, and adhere to a centralized management model: to ensure the central position of the central bank in the process of delivery; to achieve controllable anonymity, and only disclose transaction data to the central bank, a third party.
Yao Qian further interpreted and pointed out the idea of loosely coupling digital currency and bank accounts: it can be considered to introduce digital currency wallet attributes into the traditional account system of commercial banks, so that one account can manage both existing electronic currency and digital currency. currency.
secondary title
The Impact of Central Bank Digital Currency on Payment and Monetary Policy
Regarding the impact of the continuous advancement of my country's central bank's digital currency, it has been discussed by more and more scholars and relevant people this year. In the two articles "The Impact of Legal Digital Currency on Monetary Policy and Financial Stability" and "Central Bank Digital Currency: Optimization of the Currency System and Its Issuance Design" published by Yao Qian in March, Wang Xin made a speech at the seminar in July. There are related expressions. Interchain Pulse organizes their impact into the following aspects:
1. Optimize the payment system
Yao Qian pointed out that in terms of payment, the central bank's digital currency has created a new model for inter-bank payment settlement. After the introduction of the central bank's digital currency, the central bank does not need to adhere to the traditional model, that is, the private sector provides payment services and the central bank provides value guarantees. Based on the central bank's digital currency, payment does not need to rely on third-party services, thereby expanding the existing legal currency payment network. The central bank's digital currency overcomes the shortcomings of banknotes: by collecting management fees, it can achieve the negative interest rate target of unconventional monetary policy; based on traceability, it can implement anti-money laundering and anti-tax evasion; the cost of issuance, transaction, and storage is greatly reduced.
In his article "Analysis of Digital Currency", Di Gang, deputy director of the Central Bank's Digital Currency Research Institute, mentioned that "payment is settlement" is a prominent feature of legal digital currency. Legal digital currency can realize controllable and anonymous peer-to-peer transactions. With the advantages of efficient and convenient cash and instant clearing of payment, information flow and capital flow are naturally integrated, without asynchronous clearing, settlement and reconciliation in the background, and point-to-point value transfer and privacy protection in the foreground can be realized through encrypted signature conversion.
2. Improving the effectiveness of monetary policy
Wang Xin mentioned that the digitization of the central bank's currency will help optimize the central bank's currency payment function, improve the central bank's currency status and the effectiveness of monetary policy. The central bank's digital currency can become an interest-bearing asset to meet the holder's reserve demand for safe assets, it can also become the lower limit of bank deposit interest rates, and it can also become a new monetary policy tool.
Yao Qian also pointed out that based on a reasonable mechanism design, the central bank's digital currency not only has a "neutral" impact on monetary policy and macroeconomics, but can also become a new monetary policy tool. The central bank's digital currency has four characteristics: time dependence, sector dependence, loan interest rate dependence, and economic state dependence. Therefore, the central bank can reduce the time lag in monetary policy transmission, prevent currency circulation outside the real economy, improve the effectiveness and timeliness of the impact of benchmark interest rates on loan interest rates, and conduct counter-cyclical regulation.
3. Maintain financial stability
Yao Qian pointed out in the article "Central Bank Digital Currency: Optimization of the Currency System and Its Issuance Design" that in terms of financial stability, the central bank's digital currency can avoid "narrow banking" by increasing the friction and cost of converting bank deposits to the central bank's digital currency. Influence.
The development history of central bank digital currency
After understanding the framework of the central bank's digital currency, and reviewing its development history, we will find that my country's central bank's digital currency is advancing at a pace suitable for its development stage. Since 2014, under the advocacy of then-governor Zhou Xiaochuan, the People’s Bank of China has started the research and development of digital currency and central bank digital currency. It has been five years of development. At present, the Central Bank’s Digital Currency Research Institute has applied for a total of 74 patents related to digital currency.
(Tabulation: Mutual Chain Pulse Research Institute)
(Tabulation: Mutual Chain Pulse Research Institute)
