Central Bank Digital Currency CBDC Questions and Answers
Another question and answer on the central bank's digital currency. This question and answer mainly focuses on whether the central bank's digital currency will completely replace cash? Does it accrue interest? As well as the four issues of the central bank's digital currency and the reasons for adopting a centralized management model to analyze and elaborate, I hope to help everyone understand the central bank's digital currency in a deeper step! Let's see together~
Why do most central banks say that their central bank digital currency CBDC will not completely replace cash?
Cash has no requirements for network connection, professional knowledge and software and hardware equipment of cash users. However, CBDC uses an electronic payment network and system, which has caused great confusion and challenges to many users who have never used the Internet or smartphones.
At the same time, the research and development stages of the CBDC system, electronic payment system, and digital currency are still in the development or immature stage. However, as an electronic legal digital currency, the CBDC will have significant impact on monetary policy, fiscal policy, and economic stability after its issuance and circulation. The impact and possible consequences are huge, and there are no relevant lessons learned. Therefore, in the early stage of issuing central bank digital currency, countries need to spend a lot of time on the risk assessment, feasibility analysis, formulation of relevant laws and system design of electronic currency issuance, such as consulting information, collecting data, related research, formulating plans and Response measures, etc., in order to do as much preparatory work as possible.
In addition, it is necessary to conduct intensive research and strict evaluation in combination with the national conditions of the country and the background of the international environment, because on the basis of the continuous development and progress of the Internet, the growing prosperity of cross-border trade, and the further acceleration of globalization, the "community of shared future for mankind" One value is also constantly deepening, and one hair affects the whole body and the "butterfly effect" is becoming more and more profound in today's economic globalization society. The legal currency is a crucial link in this, so it cannot be ignored.
After the preliminary work is over, the design route of the central bank's digital currency system, technology application, scene access, infrastructure construction and technical standard formulation need to be continuously improved and improved. In the issuance stage, a lot of pilot work is required to check for omissions and make up for vacancies. The method of use needs to be popularized, and the promotion needs to be continuously expanded. This is also very necessary for the central bank's digital currency to be widely and orderly circulated and used in the later stage. The problems and frictions that may arise between financial institutions such as banks involved in the circulation and use of electronic money also need to be continuously explored and improved.
Therefore, no matter what the central bank's digital currency is issued, it will most likely be a model that keeps pace with paper legal currency for a long time to come.
Why do major central banks' CBDC projects tend to pay no interest?
Because the interest generated in some cases will involve tax issues, if the CBDC interest income is to be taxed, the taxpayer needs to prepare relevant tax declaration materials, and submit and go through the relevant tax payment procedures to the tax department. It involves the submission of personal information, which is not conducive to the realization of the anonymous features of CBDC.
Most central banks use CBDC instead of cash in M0 circulation. Small transactions, frequent transactions, etc. will make it more difficult to pay interest, and like my country's central bank digital currency DCEP, it supports dual offline payments, and the core of dual offline payments refers to It is a process of completing business when both the medium and the receiving terminal are offline. When the two parties to the transaction make payment in the dual-offline situation, when the interest generated by the transaction funds is generated, and which party benefits, it may be necessary to divide and screen the details, which will be important for the calculation and calculation of interest. Divide and so on cause very big difficulty.
Why issue a central bank digital currency?
① Save costs. The cost of human, material and financial resources such as RMB printing, storage and transportation is high;
②Achieving inclusive finance is a goal that will take quite a long time to achieve. Because the central bank's digital currency requires a certain foundation for the use of the Internet, and a certain understanding and awareness of Internet knowledge, and at the same time requires the possession and operation of smart phones. However, considering the current status of Internet and smartphone popularity, it will take some time to reach all users, but at least the progress of inclusive finance is on the agenda;
③In the context of the increasing influence of private digital currencies, such as Libra, which aims to build a global payment system network, and has launched a digital currency plan anchored to the legal currency of various countries, and is still working hard to implement it. Once Libra can be circulated and used without barriers on a global scale, which will threaten and affect the authority and status of legal currencies in various countries, which is also the root cause of countries' resistance to Libra. Therefore, the government needs to launch a central bank digital currency to maintain the importance of the central bank and its legal currency in the monetary system;
④ Banknotes are easy to be anonymous and forged, and there is a risk of being used for money laundering and terrorist financing. The detailed payment data that the CBDC system can provide is not only conducive to anti-money laundering and anti-terrorist financing, but also can grasp economic trends in a timely and accurate manner. Helps macroeconomic decision-making.
⑤ With the continuous upgrading and improvement of the electronic payment system, the probability of using cash is getting higher and higher. The government is also judging the situation, following the trend, and seizing the opportunity to develop the central bank's digital currency.
Why is the design of the central bank's digital currency more centralized?
In fact, this can be fully adopted at the 2019 China Financial Forty People Forum, as expressed by Mu Changchun, deputy director of the Payment and Settlement Department of the People's Bank of China, the reason why China's central bank digital currency DCEP adopts a centralized management model: "First, the central bank digital currency It is still the central bank's liability to the public. This creditor-debt relationship has not changed with the change of currency form. Therefore, it is still necessary to ensure the central position of the central bank in the process of delivery; second, in order to ensure and strengthen the central bank's macro-prudential and currency control functions, it is necessary to continue to adhere to the centralized management model; third, the second layer designates operating agencies to carry out currency exchange, and centralized management is required to avoid over-issuance of currency by designated operating agencies; finally, because in the entire exchange In the process, the dual account system has not been changed, so the original monetary policy transmission method should be maintained, which also requires maintaining the central management position of the central bank.”
To sum up, the essence of the central bank's digital currency is still the attribute of legal currency, which is closely related to the development of the national economy and the direction of economic policies. Therefore, it is impossible for any central bank to let the management of legal currency be left aside. At the same time, legal currency is endorsed by the country and the government. This is the fundamental reason for the credit of legal currency. Once decentralized management is adopted, it will breed a breeding ground for illegal activities such as anti-money laundering and anti-terrorist financing. This is also the central bank digital currency and private digital currency. fundamental difference. Di Gang, deputy director of the Digital Currency Research Institute of the Central Bank of my country, also said: "In our opinion, this is a decentralized or distributed architecture from a technical point of view, not a decentralized management. Physical distribution and logic The unification is not contradictory, all distribution should be a manageable distribution, otherwise it will be a disaster.”
