Xiao Lei: The central bank’s digital currency has a clear goal, but underestimates the US thinking
Editor's Note: This article comes fromXiao Lei looks at the city (ID: kanshi1314), author Xiao Lei, reproduced by Odaily with authorization.
Editor's Note: This article comes from
Xiao Lei looks at the city (ID: kanshi1314)
Xiao Lei looks at the city (ID: kanshi1314)
, author Xiao Lei, reproduced by Odaily with authorization.
At a financial elite forum on August 10, 2019, Mu Changchun, deputy director of the Central Bank's Payment and Settlement Department, once again elaborated on the specific progress of the central bank's digital currency research and development and the final form in the future.
Judging from the specific information conveyed, it is all-round, but a lot of it is still in written language. Let me explain the key points in plain language for you. In fact, there are many important information revealed inadvertently.
The first one is that the central bank has worked overtime in the past year to engage in digital currency due to some kind of stimulus.
According to Mu Changchun, the research on the central bank’s digital currency DC/EP started in 2014 and has lasted for five years. The first four years did not seem to be in a hurry, but since last year, due to some stimulus, the entire R&D team has I started working overtime, from 9:00 am to 9:00 pm every day, and only had one day off a week. At this point, the development of related systems can be said to have reached the point where it is ready to be released. As long as the banking system can support it, the above will issue an order , you can push it.
Exactly what kind of stimulus the central bank received a year ago is currently unknown, but I took a look at what happened a year ago, that is, from June to August last year, and I may be able to find some clues.
In June last year, the United States began to impose tariffs on Chinese goods exported to the United States for the first time. Sino-US trade frictions heated up, the RMB exchange rate fell, and the demand for digital currencies in the domestic market increased. The chaos in the token market”, the Cyberspace Administration of China has banned many self-media accounts, and five ministries and commissions have issued risk warnings, etc. In June last year, the Digital Currency Research Institute of the People's Bank of China announced 4 patent applications within a month. By September last year, the central bank had applied for a total of 49 legal digital currency patents.
In other words, since June last year, China has strengthened controls at two levels, one is the guidance and control of digital currency at the level of public opinion, and the other is at the level of the central bank to build public confidence in China's official digital currency. When the instruction was issued, it was required to speed up the pace of research and development of legal digital currency, so there was the "996" work model in the past year as Mu Changchun said.
The second is that the central bank has, to some extent, recognized the legal existence of Bitcoin and Ethereum
Mu Changchun said that during Double Eleven last year, the transaction peak of Netlink reached 92,771 transactions per second. For comparison, Bitcoin is 7 transactions per second, and Ethereum is 10 to 20 transactions per second. According to Libra just released White paper, 1000 strokes per second.
This sentence inadvertently reveals an important message. When the central bank quoted Bitcoin and Ethereum, it no longer had any concerns. It directly mentioned Bitcoin and Ethereum without any explanation. This shows that from the level of the central bank, it has Acknowledging the objective existence and rationality of Bitcoin, Ethereum, and the future Libra may have been defined as a competitor of the central bank's digital currency, and it is a reference and comparison object for research and implementation of the central bank's digital currency.
This is similar to the fact that in history, when the sovereign credit currency is to be promoted, it must not only be enforced from the legal level, but also from the level of theoretical research and academic output, and why it is an improvement to replace gold and silver with banknotes. The first thing to publicize is that gold and silver, as currencies, can no longer meet the trade needs of modern society. In front of banknotes, gold and silver have fatal flaws. One is that the quantity is limited, and the other is that it cannot achieve high concurrency. Note that this is not devaluing gold and silver, quite the contrary, this is paper money devaluing the competition.
As long as countries promote official digital currencies, one of the rhetoric is that the low concurrency of Bitcoin and Ethereum cannot meet the needs of human trade, settlement and payment, and at the same time admits a problem, Bitcoin and Ethereum will be central bank digital currencies longtime competitor. Just like gold and silver will rise in price from time to time in response to the decline in the credit of paper money.
The third is that the digital currency issued by the central bank has no room for hype, but it has some special functions
According to Mu Changchun, the two-layer structure adopted by the central bank's digital currency is actually the central bank plus commercial banks. The real issuer is the commercial bank, but the commercial bank needs 100% reserve for issuance. In fact, to put it bluntly, this is equivalent to issuing A "stablecoin" based on the yuan.
According to the current design, there are roughly three ways for people to obtain central bank digital currency. The first category is to go to the bank to open a digital currency wallet, and directly hold the cash in hand, including banknotes and coins, and exchange it for digital currency (handled at the counter) ); the second type is to directly take the money in the existing account and use online banking to purchase online, which is similar to transferring the money in the bank account to Alipay or WeChat payment (online); the third is to directly trade off-site, I transfer it to you, you transfer it to me, or if I have something to sell, it is clear that only digital currency is accepted.
In terms of payment, there may be three forms of payment in China in the future, online banking, third-party payment (Alipay, WeChat payment, etc.), and official digital currency. Then everyone has to consider whether you put your money in online banking or third-party payment. In the payment, or in the digital currency account.
In online banking, there is interest on deposits. In third-party payment accounts, you can buy currency funds, etc. The interest is relatively high, but there is no interest on digital currency (you also have no interest on paper money and coins).
So what are the advantages of digital currency? Due to the different operating logic, the main attribute is the replacement of M0, that is, the replacement of banknotes and coins in the market, so the privacy is higher than that of online banking and third-party payment accounts. To put it bluntly, as long as you don’t violate the Three Antis (anti-money laundering, anti-terrorism and non-financing, and anti-tax evasion), as for who you transferred the money to, it’s like who you gave the cash to in private. No one will know.
Here, I don't know how to gain the trust of the public. After all, once digitized, it is unlikely to have high privacy attributes like cash. Without the guarantee of decentralization, how to establish this trust mechanism is a challenge.
Of course, the central bank is still very smart, kicking the ball of building public trust to commercial banks and various development institutions. Mu Changchun said, "We also said at the beginning that the two-tier operating system is conducive to fully mobilizing market forces and achieving system optimization through competition. At present, we are in a state of horse racing, and several designated operating agencies adopt different technologies. For DC/EP research and development, whoever has a good route will eventually be accepted by the people and the market, and whoever will win the competition. So this is the process of selecting the best through market competition.”
The fourth is that I personally predict that the central bank's digital currency may be difficult to achieve the desired effect
Judging from the existing information, no matter how many design goals the central bank’s digital currency has, it is actually a process of eliminating cash in the end. But the problem is that without digital currency, cash will gradually disappear. This is a historical trend. Otherwise, why is there a special document to punish those business entities that do not accept cash? The de-cashization of the Chinese market will be faster and faster, and Mu Changchun also said that for ordinary people, the basic payment function is actually relatively blurred between electronic payment and central bank digital currency.
In addition, the central bank’s digital currency is mainly intended to be used in small-amount retail scenarios. It will not crowd out deposits, and can avoid “Yu’e Bao”-style deposit relocation. It is necessary to set transaction limits and balance limits for different levels of wallets.
Here I would like to make a suggestion to the central bank. In the current design of digital currency, it is best not to preconceive the issue of competition with M2 and M1, because the real competitors of the central bank's digital currency are not M2 and M1, but many international markets in the future. Digital currency, including the US dollar credit-based digital currency that has sprouted in the US market. If the domestic people are unwilling to exchange their M1 and M2 for digital currency, then what motivation does the international market have to exchange for China's digital currency? And how to boost internationalization?
