Editor's Note: This article comes fromBabbitt Information (ID: bitcoin8btc), Author: Helen, published with permission.

Editor's Note: This article comes from

Babbitt Information (ID: bitcoin8btc)

, Author: Helen, published with permission.

On August 10, at the China Finance Forty Forum, Mu Changchun, deputy director of the Payment and Settlement Department of the People's Bank of China, said: After five years of research, the central bank's digital currency can be said to be ready. He introduced the design concept and technical architecture of the central bank's digital currency, with the following points:

1. In order to meet the high concurrency performance of the retail level, the pure blockchain architecture cannot meet the requirements;

2. The central bank's digital currency adopts a two-tier operating system, with the central bank as the upper layer and commercial banks as the second layer;

3. The two-tier operating system will not change the creditor-debt relationship of the currency in circulation. In order to ensure that the central bank’s digital currency is not overissued, commercial institutions pay the central bank’s full amount and 100% of their reserves;

4. There is no preset technical route. From the perspective of the central bank, whether you are a blockchain or a centralized account system, electronic payment or so-called mobile money, the central bank can adapt to any technical route you take;

5. The central bank's digital currency design at this stage focuses on the replacement of M0, rather than the replacement of M1 and M2;

7. DC/EP must adhere to the centralized management model;

8. Central bank digital currency can be loaded with smart contracts.

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After 5 years of research, the central bank's digital currency is ready

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Third, the two-tier operating system helps to defuse risks and avoid excessive concentration of risks. The People's Bank of China has developed and operated many payment and settlement systems and payment systems, including large and small amounts, including UnionPay, but the clearing systems we originally made were all for financial institutions. However, the issuance of central bank digital currency must directly face the public. This involves thousands of households. It is not easy to develop and support such a huge system only by the central bank itself, and to meet the needs of efficiency, stability and security, and to improve customer experience. So from this point of view, whether it is in terms of technical route selection, operational risk, or commercial risk, we can avoid excessive concentration of risks in a single institution through the two-tier operation design.

The single-tier operating system is where the People's Bank of China directly issues digital currency to the public. The People's Bank of China first exchanges the digital currency to banks or other operating institutions, and then these institutions exchange it to the public. This is a two-tier operating system.

There are several other considerations for adopting a two-tier operating structure:

First of all, China is a complex economy with a vast territory and a large population. The economic development, resource endowment, population education level and acceptance of smart terminals are all different in different regions. Therefore, issuing legal digital currency in such an economy is a complex and systematic project. If a single-tier operating structure is adopted, it means that the central bank has to face all the public alone. In this case, it will bring great challenges to the central bank. From the perspective of improving availability and enhancing the willingness of the public to use it, we believe that a two-tier operating structure should be adopted to deal with this difficulty.

Second, the People's Bank of China decided to adopt a two-tier structure in order to give full play to the resources, talents and technological advantages of commercial institutions, promote innovation, and compete for excellence. Commercial organizations have relatively mature IT infrastructure and service systems, and relatively strong system processing capabilities. They have accumulated a certain amount of experience in the application of financial technology and have a relatively sufficient talent pool. Therefore, it would be a huge waste of resources to start a new business in addition to the existing infrastructure, human resources and service systems of commercial banks. Institutions such as the central bank and commercial banks can cooperate closely without presupposing technical routes, fully mobilize market forces, achieve system optimization through competition, and jointly develop and operate together. Later we discovered that the organizational structure of Libra is actually the same as the organizational structure adopted by our DC/EP back then.

Third, the two-tier operating system helps to defuse risks and avoid excessive concentration of risks. The People's Bank of China has developed and operated many payment and settlement systems and payment systems, including large and small amounts, including UnionPay, but the clearing systems we originally made were all for financial institutions. However, the issuance of central bank digital currency must directly face the public. This involves thousands of households. It is not easy to develop and support such a huge system only by the central bank itself, and to meet the needs of efficiency, stability and security, and to improve customer experience. So from this point of view, whether it is in terms of technical route selection, operational risk, or commercial risk, we can avoid excessive concentration of risks in a single institution through the two-tier operation design.

Fourth, if we use a single-tier operating structure, it will lead to financial disintermediation. Under the single-tier delivery framework, the central bank launches digital currency directly to the public. Compared with the commercial bank deposit currency, the central bank digital currency is more competitive than the commercial bank deposit currency under the credit endorsement of the central bank, which will squeeze commercial bank deposits. This will affect commercial banks' ability to extend loans and increase commercial banks' dependence on the interbank market. In this case, the price of funds will be raised, social financing costs will be increased, and the real economy will be damaged. At that time, the central bank will have to subsidize commercial banks. In extreme cases, it may even subvert the existing financial system, returning to the "big unification" of the central bank before 1984. pattern.

To sum up, the central bank is the upper layer, and the commercial banks are the second layer. This dual investment system is suitable for our national conditions. It can not only mobilize the enthusiasm of commercial banks by using existing resources, but also smoothly improve the acceptance of digital currency.

Fourth, if we use a single-tier operating structure, it will lead to financial disintermediation. Under the single-tier delivery framework, the central bank launches digital currency directly to the public. Compared with the commercial bank deposit currency, the central bank digital currency is more competitive than the commercial bank deposit currency under the credit endorsement of the central bank, which will squeeze commercial bank deposits. This will affect commercial banks' ability to extend loans and increase commercial banks' dependence on the interbank market. In this case, the price of funds will be raised, social financing costs will be increased, and the real economy will be damaged. At that time, the central bank will have to subsidize commercial banks. In extreme cases, it may even subvert the existing financial system, returning to the "big unification" of the central bank before 1984. pattern.

To sum up, the central bank is the upper layer, and the commercial banks are the second layer. This dual investment system is suitable for our national conditions. It can not only mobilize the enthusiasm of commercial banks by using existing resources, but also smoothly improve the acceptance of digital currency.

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The two-tier operating system will not change the creditor-debt relationship of the currency in circulation. In order to ensure that the central bank’s digital currency is not overissued, commercial institutions pay the central bank’s full and 100% reserve funds. The central bank’s digital currency is still the central bank’s liability, and the central bank’s credit Guarantee with unlimited legal indemnity.

In addition, the two-tier operating system will not change the existing currency delivery system and binary account structure, and will not compete with commercial bank deposit currencies. Since it will not affect the existing monetary policy transmission mechanism and will not strengthen the pro-cyclical effect in a stressful environment, it will not have a negative impact on the real economy.

In addition, adopting a two-tier system to issue and exchange the central bank's legal digital currency is also conducive to curbing the public's demand for encrypted assets and consolidating our national currency sovereignty.

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Talk about the technical route again. Let me say here again that in the original design, there was an idea of ​​using blockchain, and the architecture of "one currency, two warehouses and three centers" was also envisioned. But in fact, we do not preset the technical route, that is to say, at the level of the central bank, we are technology-neutral. Characteristic of unlimited legal indemnity.

From the perspective of the central bank, whether you are a blockchain or a centralized account system, electronic payment or so-called mobile money, the central bank can adapt to any technical route you take. Of course, your technical route must meet our threshold. For example, because it is aimed at retail, it must at least meet high concurrency requirements, at least 300,000 transactions per second. If you can only meet Libra's standards, you can only exchange internationally. It takes 40 minutes to make a transaction like Bitcoin, and the entire supermarket will have to queue up. From the perspective of the central bank, we have never preset a technical route, and it is not necessarily a blockchain. Any technical route is possible. We can call it Long Term Evolution.

First, the central bank's digital currency is still a liability of the central bank 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 delivery process.

First, the central bank's digital currency is still a liability of the central bank 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 delivery process.

Second, in order to ensure and strengthen the central bank's macro-prudential and monetary regulation functions, it is necessary to continue to adhere to the centralized management model.

Third, the second layer designates operating agencies to exchange currencies, and centralized management is required to avoid over-issuance of currency by designated operating agencies.

Finally, because the binary account system has not been changed during the entire exchange process, the original monetary policy transmission method should be maintained, which also requires maintaining the central management position of the central bank.

Third, the second layer designates operating agencies to exchange currencies, and centralized management is required to avoid over-issuance of currency by designated operating agencies.

Finally, because the binary account system has not been changed during the entire exchange process, the original monetary policy transmission method should be maintained, which also requires maintaining the central management position of the central bank.

Centralized management is different from electronic payment tools. From a macroeconomic point of view, the transfer of electronic payment tools must be completed through traditional bank accounts, and the account is tightly coupled. For the central bank's digital currency, we are loosely coupled with accounts, that is, to achieve value transfer without traditional bank accounts, so that the transaction link's dependence on accounts is greatly reduced. In this way, the central bank's digital currency can be as easy to circulate as cash, which is conducive to the circulation and internationalization of RMB, and at the same time can achieve controllable anonymity. , anti-tax evasion), a balance must be struck between these two.

Focus on the replacement of M0

In addition, everyone has also seen that Libra is also mortgaged with so-called 100% reserve assets, but it does not limit itself to M0, because there may be currency derivatives and currency multipliers when Libra enters the credit market. This may lead to over-issued currency.

In addition, everyone has also seen that Libra is also mortgaged with so-called 100% reserve assets, but it does not limit itself to M0, because there may be currency derivatives and currency multipliers when Libra enters the credit market. This may lead to over-issued currency.

In addition, because the central bank's digital currency is a substitute for M0, no interest is paid on cash, which will not trigger financial disintermediation, nor will it have a major impact on the existing real economy.

Since the central bank's digital currency is a substitute for M0, all current regulations on cash management, anti-money laundering, and anti-terrorism financing should be followed, and large and suspicious transactions of the central bank's digital currency should be reported to the People's Bank of China.

In addition, we have repeatedly emphasized that the central bank's digital currency must have high scalability and high concurrent performance. It is used in small retail high-frequency business scenarios. In order to guide the central bank's digital currency to be used in small retail scenarios, without crowding out deposits, and avoiding arbitrage and procyclical effects in stressful environments, we can set transaction limits and balance limits according to different levels of wallets. In addition, some exchange costs and frictions can be added to avoid pro-cyclical situations in stressful environments.

Since the central bank's digital currency is a substitute for M0, all current regulations on cash management, anti-money laundering, and anti-terrorism financing should be followed, and large and suspicious transactions of the central bank's digital currency should be reported to the People's Bank of China.

In addition, we have repeatedly emphasized that the central bank's digital currency must have high scalability and high concurrent performance. It is used in small retail high-frequency business scenarios. In order to guide the central bank's digital currency to be used in small retail scenarios, without crowding out deposits, and avoiding arbitrage and procyclical effects in stressful environments, we can set transaction limits and balance limits according to different levels of wallets. In addition, some exchange costs and frictions can be added to avoid pro-cyclical situations in stressful environments.

In addition, the central bank digital currency can also provide the conditions for the central bank to implement negative interest rates if needed.