Author/Gong Quanyu

Author/Gong Quanyu

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"The digital currency of the People's Bank of China is about to come out." Mu Changchun, deputy director of the Payment and Settlement Department of the People's Bank of China, made this statement at the Yichun Forum of China's Financial 40 the day before yesterday, which aroused great concern from the entire cryptocurrency industry.

It is understood that the China Finance 40 Forum is one of the most influential platforms for policy research and academic exchanges in the economic and financial fields in China. Qian Yingyi, Wu Jinglian, Yi Gang, Huang Qifan and many other well-known scholars and officials are members of the forum , so each forum's voice will be regarded as an important indicator of China's economic and financial policies.

Due to the news that Facebook issued the digital currency Libra in the past few months, which has spread around the world and may have a major impact on the global financial system, digital currency has become one of the hottest topics in this forum. Mu Changchun’s speech on the central bank’s digital currency It was against this background that it was born.

In fact, it is no secret to the financial industry that the central bank is developing digital currency. Since 2014, under the promotion of Zhou Xiaochuan, then governor of the central bank, a special research group for issuing legal digital currency has been established. From the perspective of time, it is possible It is directly related to the surge of Bitcoin in the second half of 2013.

Judging from the previous statements of the central bank, the central bank's digital currency (DC/EP) will be a legal digital currency based on national credit, and it clearly adopts a centralized management method. Compared with the renminbi in circulation today, although the experience of the central bank's digital currency has payment and circulation attributes and unlimited legal compensation, the user experience may also be similar to electronic payment methods, but it has a greater impact on the macro-control of financial policies and the operating efficiency of the economic system than the former. Greater advantage.

Sheng Songcheng, a counselor of the People's Bank of China, said two years ago that the central bank's issuance of digital currency is not only to replace paper money in cash circulation, but to better serve currency issuance and monetary policy, improve payment and settlement efficiency and retain the control of currency sovereignty. Shao Fujun, chairman of China UnionPay Co., Ltd., further pointed out several advantages of digital currency in this forum:

First, it can improve the efficiency of monitoring currency operation and enrich the means of monetary policy. The central bank's digital currency issuance will make it possible to collect data such as currency creation, accounting, and flow in real time, and after data desensitization, conduct in-depth analysis through big data and other technical means to provide useful reference for currency injection, monetary policy formulation and implementation , and provide useful means for economic regulation. At the same time, the central bank's digital currency can also provide some help in anti-money laundering and anti-terrorist financing.

Second, it is conducive to improving the intelligence level of the transaction process. The legal digital currency is not only the digitalization of currency, but also through the combination with intelligent technology and the design of smart contracts, it can better solve the trust problem between the two parties in the transaction and the synchronization of information flow and capital flow, thus greatly simplifying the transactions between traditional financial institutions process.

Third, improve the efficiency of payment, especially cross-border payment, and establish an open payment environment. From the perspective of payment function, through the use of legal digital currency, the network of legal currency circulation can be greatly flattened, the bottom layer of the payment system can be fully interconnected, the exchange process can be greatly reduced, and the liquidity of cross-border funds can be improved. There are problems such as long border remittance chain, slow arrival, and low efficiency.

As for the specific use scenarios and technical solutions of the central bank's digital currency, it has been in the discussion stage for the past few years and has been rarely disclosed. However, many central bank officials such as Mu Changchun have discussed this topic in detail in this forum.

It can be seen from Mu Changchun's relevant speech that small retail payments will be the main application scenario of the central bank's digital currency. For this reason, the central bank's digital currency needs to meet, high scalability, and high concurrency requirements, that is, the TPS should reach at least 300,000 transactions per second , which puts very high demands on its technical architecture.

Mu Changchun said that both the blockchain technology and the centralized account system were within the scope of the central bank's consideration. Regarding the question of whether the central bank's digital currency adopts blockchain technology, the digital currency research team of the People's Bank of China has developed a fully blockchain-based system. The prototype product of the architecture, but later found that the high concurrency performance required by retail cannot be achieved by using a pure blockchain architecture. Therefore, the central bank decided to maintain technical neutrality, not preset technical routes, and adopt a two-tier operating system. This statement also indirectly reflects that the central bank's digital currency technical architecture may not yet be finalized.

At the same time, the central bank’s digital currency adopts a two-tier operating structure, with the central bank as the upper layer and commercial banks as the second layer, that is, the central bank first exchanges the digital currency to specific commercial institutions such as banks, and then these institutions exchange it to the public. Based on the existing infrastructure, human resources and service system of commercial organizations.

On the one hand, this helps to defuse risks and avoid excessive concentration of risks. On the other hand, it helps to fully mobilize market forces and achieve system optimization through competition. "At present, we are in a state of horse racing. Several designated operating organizations adopt different technical routes for DC/EP R&D. Whoever has a better route will eventually be accepted by the people and the market, and whoever will eventually win the game. So this is a process of market competition and selection of the best," Mu Changchun said.

In the process of circulation, the central bank’s digital currency will be separated from traditional bank accounts to realize value transfer, and the transaction link’s dependence on accounts will be greatly reduced, making the central bank’s digital currency as easy to circulate as cash, which is conducive to the circulation and internationalization of RMB, and at the same time Controlled anonymity can be achieved.

At the same time, Mu Changchun said that the central bank’s digital currency design at this stage focuses on the replacement of M0 (cash in circulation), rather than the replacement of M1 (M0+current deposits) and M2 (M1+time deposits), because M1 and M2 have now been digitized. , Digitization, if it is done again, it will not only not help improve payment efficiency, but will also cause a huge waste of existing systems and resources.

In other words, the central bank's digital currency wants to replace the use of cash to a greater extent than electronic payment methods such as Alipay and WeChat Pay. "Existing M0 (banknotes and coins) are easy to forge anonymously, and there is a risk of being used for money laundering, terrorist financing, etc. Especially in areas with poor account services and communication network coverage, the public is still relatively dependent on cash "Mu Changchun said, "So our DC/EP design maintains the attributes and main features of cash, and also meets the needs of portability and anonymity. It is a better tool to replace cash."

However, how the central bank's digital currency can achieve the portability equivalent to cash will be the key to whether its goal can be realized. In addition, the degree of anonymity that the central bank's digital currency can achieve also deserves further attention.

Mu Changchun also said that in order not to have a major impact on the existing real economy, the central bank's digital currency does not calculate and pay interest. If necessary, the central bank's digital currency can also provide conditions for the central bank to implement negative interest rates.

Although Mu Changchun used the urgency of the central bank's digital currency in this forum, "it's about to come out", considering that it has not yet been developed, and its legislation needs to go through complicated processes such as drafting preparations, deliberations and demonstrations, and solicitation of opinions. The scene is expected to take at least 1-2 years, and there should be many variables in the specific setting.