The central bank's digital currency is eager to internationalize, and the sword refers to the pricing power of digital assets

Editor's note: This article was first published on the WeChat public account Zinc Link (ID: xinlianjie-), author: Zhao Xuejiao; editor: Wang Qiao, pay attention to the public account, and explore the value of industrial blockchain with us. If you need to repost the article, please apply for a whitelist on WeChat.

Editor's note: This article was first published on the WeChat public account Zinc Link (ID: xinlianjie-), author: Zhao Xuejiao; editor: Wang Qiao, pay attention to the public account, and explore the value of industrial blockchain with us. If you need to repost the article, please apply for a whitelist on WeChat.

On August 18, the Central Committee of the Communist Party of China and the State Council issued the "Opinions on Supporting Shenzhen's Construction of a Pioneering Demonstration Zone of Socialism with Chinese Characteristics", which mentioned that it supports Shenzhen's innovative exploration of digital currency research and mobile payment.

A big move is being laid out. The introduction of digital currency by the domestic central bank is conducive to accelerating the internationalization of the RMB, making China's CBDC have the potential to become a pricing standard for digital assets, contributing to the rebalancing of the international monetary system and promoting the development of the world economy.

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1. The demand is not strong, and CBDC refers to the pricing power of digital assets

In the era of digital economy, more and more traditional assets will be transformed into digital assets. The biggest significance of the central bank's promotion of digital currency is that CBDC has the potential to become the pricing standard for digital assets in the future, making RMB the pricing standard for digital assets instead of the US dollar.

Recently, the U.S. government has approved some stablecoins, legally anchoring the stablecoins to the U.S. dollar 1:1, opening up a bridge between the U.S. dollar and digital currencies.

Through the stable currency, the United States has tied the global digital currency to the US dollar chariot, and the US dollar's international currency status and influence have been consolidated.

Domestically, digital currency has always been subject to strong regulation. Recently, it has been making more and more voices, which is not in line with the previous low-key and cautious style.

Moreover, the domestic currency issuance system is relatively complete, and the demand for digital legal currency is not strong. In addition, domestic mobile payment is very developed, and Alipay, WeChat Pay, Huawei, and Wanglian are all doing payment.Zhu Youping, deputy director of the China Economic Network Management Center of the State Information Center, told Zinc Link,

The central bank’s rush to issue CBDC is mainly affected by the international situation. The fundamental reason is to accelerate the process of RMB internationalization, and China cannot lose the development opportunity in the field of digital currency.

Zhu Youping analyzed: "The United States has realized that instead of suppressing Bitcoin, it is better to bind the U.S. dollar and cryptocurrencies with stablecoins. Bitcoin cannot replace the U.S. dollar, but instead consolidates the U.S. dollar's international currency status."

As for the pricing power of digital assets, Liu Xiaolei, a professor of finance at Peking University’s Guanghua School of Management, told Zinc Link that if a part of the assets are digitized and placed on the platform, it will depend entirely on the value of the underlying assets. If it is a Token on the blockchain, it should be valued by currency. The price of currency, such as the legal currency issued by the country, is priced through the circulation and velocity of currency. The prices of different digital assets vary widely.

In the future, if digital assets become a large part of assets, then there needs to be a set of pricing standards.

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2. The competition between CBDC, Libra and Bitcoin

Compared with Libra and other digital currencies, CBDC is competitive in competing for digital asset pricing power.

In terms of credit, the core difference between central bank digital currency and virtual currencies such as Bitcoin is: virtual currency is decentralized, while central bank digital currency is centralized.

Centralized digital currency, like RMB, is the endorsement of national credit. Bitcoin, on the other hand, does not have any underlying foundational support, and its valuation comes from the user's "belief" in it.

The advantage of CBDC is that the central bank can better manage the creation and supply of money, making the monetary policy transmission mechanism more effective; the payment and settlement system based on blockchain technology can reduce costs and increase efficiency.

The decentralized virtual currency represented by Bitcoin also has many advantages.

However, there are still many risks in virtual currency, one is the lack of transparency; the other is the lack of legal recognition and supervision, and there is no compensation mechanism for losses suffered due to fraud, theft, and entity bankruptcy; the third is technical security problems; the fourth is problem solving The cost can be high.

Similarly, Libra also faces great moral hazard.

In terms of launch speed, according to a report from China Daily on the 20th, experts predicted that if all goes well, the digital currency supported by the Chinese government may be released earlier than the official Libra. But what the result will be depends on the facts.

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3. There is an additional "central bank player" in mobile payment

According to Mu Changchun's introduction, the CBDC launched by my country mainly replaces M0, which is cash.

Zhu Youping told ZincLink that when the total amount of M0 is determined, either part of M0 will be issued with CBDC, and part of it will be issued with banknotes; or all of M0 will be issued with CBDC.

If CBDC only replaces banknotes and coins, it will have little impact on monetary policy and commercial banks.

In traditional currency issuance, cash in circulation is actually a direct liability of the central bank to the public, but due to technical limitations and cost considerations, the central bank issues cash through commercial banks.

Wen Xinxiang of the central bank believes that the circulation of the central bank’s CBDC is still through the central bank and financial institutions to enterprises and individuals. It is exactly the same as banknotes in terms of currency creation channels, circulation links, and functions, and it does not depart from the scope of traditional monetary policy regulation.

However, CBDC will join the payment field, which will have a considerable impact on third-party payment institutions.

Now, consumers can use WeChat and Alipay to make electronic payments, and they can also use the central bank’s CBDC to pay in the future. Mobile payment has an additional “central bank player” and a strong competitor. In the future, it is still unknown what policies the government will issue to regulate third-party payment institutions.

The impact of CBDC on the real industry is achieved indirectly through banking, securities, insurance, investment and other financial institutions serving the real industry, saving costs and improving efficiency.

In the cross-border trade blockchain trading platform currently under construction, the real fund payment is done outside the chain, and only the payment information is recorded on the blockchain.

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Liu Xiaolei told ZincLink that especially if smart contracts can be installed on the blockchain, the problem of counterparty risk can be greatly solved. For example, the ocean bill of lading and digital currency used as a certificate of property rights can be converted at the same time, similar to "payment in one hand, delivery in one hand", there is no problem of the counterparty's default, and there is no need to examine the credit of the counterparty.

Secondly, CBDC will be safer, more efficient and more convenient in cross-border payment. Taking global tourism as an example, He Yingqi, general manager of BTG Homeinn’s blockchain, said that after the launch of China’s CBDC, tourists no longer need to hold travel passports and go to the bank to queue up to exchange foreign exchange cash. They can travel around the world with a mobile phone, and the travel experience has been greatly improved. .

In the field of digital copyright ecology, Xuan Hongliang, deputy secretary-general of the Capital Copyright Industry Alliance, told ZincLink that when value is transferred, users don't care whether it is the central bank's digital currency, electronic currency or private digital currency to pay. Because from the perspective of asset transactions, as long as it can prove that the payment is completed, it can do the transfer and authorization of assets.

Supply chain finance was once thought to have a big impact, but according to interviews with ZincLink, that's not the case. Zou Jun, CEO of GRG Express Blockchain Technology, and Chen Haifeng, Executive Director of Bubi Guangzhou Blockchain Technology Research Institute, agreed that CBDC will not have an impact on supply chain finance in the short term because it replaces M0.

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4. CBDC faces challenges: it may be marginalized

Overall, CBDC is good for the blockchain industry. The issuance of CBDC by central banks of various countries represents the official recognition of encrypted digital currency and blockchain technology.

Zhu Youping told ZincLink that in the future, if encrypted digital currencies can be effectively supervised, CBDC may be exchangeable with private digital currencies.

However, in the era of digital economy, digital assets will also bring new challenges to CBDC.Xuan Hongliang, deputy secretary-general of the Capital Copyright Industry Alliance, told Zinc Link

, In the era of digital economy, digital assets may exist in parallel with digital fiat currencies, circulating in different application scenarios.

In the digital asset trading market, an equivalent exchange between digital assets will naturally be formed, and settlement in legal currency is not necessarily required. When a digital asset can be accepted by a large number of international users, the central bank's digital currency will face the possibility of being marginalized. This will be the biggest challenge for the central bank's digital currency in the future.

In view of the immature development of the entire digital asset at present, it is not so urgent to compete for the pricing power of the RMB or the US dollar, or a basket of currencies (Libra) with the US dollar as the core.

However, the launch, trial operation and improvement of digital currency will take time.

Liu Xiaolei revealed that my country's digital currency design plan adopts a two-tier operating system, which cannot be completed by the central bank itself, and the cooperation between commercial banks and the central bank is particularly important. All of these require trials and quite a long period of running-in and trial operation before they can be continuously improved.

Zhu Youping predicted that the future global monetary system will form a multi-currency system, which is the trend. Legal currency has the function of legal currency, and the currency launched by non-governmental organizations has the function of private currency, forming a new balance in which a hundred coins contend.

Therefore, although the dispute over the pricing power of digital assets has not yet come, our country should take precautions and launch a pilot RMB digital currency as soon as possible.